Dealing with Data-opolies

When companies exert too much power over the marketplace, governments will step in to ensure fairness to consumers. This has happened to utilities, telecommunications, and now it may happen with social media companies.

On August 22, 2012, the Federal Trade Commission (“FTC”) announced that it had “closed its investigation of Facebook’s proposed acquisition of Instagram, [and that] the deal may proceed as proposed.” (Federal Trade Commission). Now, the FTC is second-guessing its blessing of Facebook’s major acquisitions, Instagram and WhatsApp, and is gearing up to file an antitrust lawsuit against Facebook. (Kendall et. al., Wall Street Journal). Facebook’s previously unchecked acquisition practices have sparked inquiry into whether Facebook is purchasing startups to keep them from competing with the company. Id. Facebook has acquired an astounding amount of businesses, roughly 90 companies over the past 15 years. Id. If the FTC concludes that the company is engaging in practices that reduce competition, Facebook could face severe repercussions, ranging from required divestitures to reduced ability to fully integrate its acquisitions. (Jamshed & Akins, S&P Global Market Intelligence).

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SEC Enforcement, Trending Topics, Deals and M&ARace to the BottomHannah Williams
The Drive Towards a Green Future: Will an Intricate Fraud Get in the Way?

As the pressure for clean alternatives to conventional gas-powered vehicles mounts, entrepreneurs, such as Elon Musk, have transformed the electric-powered vehicle industry into a future-oriented marketplace and are making electric vehicles accessible for Americans. For example, Tesla Motors (“Tesla”) is now the number one electric automaker in the United States (“U.S.”). Tesla makes up 35% of the electric vehicle market, beating traditional companies such as General Motors and Ford. (Edison Electric Institute). With success comes competition. In 2014, Trevor Milton founded Nikola Corporation (“Nikola”), which manufacturers semi-trucks and pick-up trucks powered by hydrogen and electric batteries, in competition with Tesla’s electric Cybertruck. (Forbes). However, as of June 2020, Nikola was worth $23 billion despite having zero sales and zero revenues and Trevor Milton has been accused of misrepresenting the company’s technology to investors. (Id.; Graham Rapier, Business Insider).

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Shareholder Actions, Trending Topics, SEC EnforcementRace to the BottomCameron Van Beek
Former “Unicorn” Casper Sleep Faces Allegations of Misleading Investors

One of the year’s most anticipated IPOs was that of Casper Sleep, Inc., the direct-to-consumer mattress company that officially went public in February 2020. (Claire Roth, Bloomberg). Casper entered the market at $12 per share and closed its first day with shares trading at $13.50, not exactly the hottest start for one of Wall Street’s newest additions. (Id.) Since then, the mattress retailer now faces a lawsuit from its shareholders claiming that, among other things, Casper misled investors by claiming in its initial registration statement that its gross profit margins were improving. (Complaint, Lematta v. Casper Sleep, Inc., Docket No. 1:20-cv-02744 (E.D.N.Y. June 19, 2020)). In reality, as its first quarter filing states, the newly public company was subject to decreasing profit margins and a near 100% increase in net losses year over year. (Casper Sleep, Form 10-Q). The suit against one of Wall Street’s newest IPOs is set to continue its proceedings this fall.

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Shareholder Actions, SEC Enforcement, Trending TopicsRace to the BottomBradley Ecker
SEC Amends Accredited Investor Definitions

On August 26, 2020, the Securities and Exchange Commission (“SEC”) officially updated the definition of “accredited investors” under the Securities Act of 1933 (“Securities Act”). (Press Release, SEC Modernizes the Accredited Investor Definition). The amendments greatly expand the threshold of determining whether an investor is accredited in Rule 215 and Rule 501(a) of the Securities Act, signaling a significant overhaul of the growing market for exempt offerings.

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Featured Topic, SEC Enforcement, Trending TopicsRace to the BottomBradley Ecker, William Nelson
Do Corporations Have a Role in Getting out the 2020 Vote?

With the 2020 Presidential Election just around the corner, voting paraphernalia, media campaigns, and the like are hard to avoid. Now, Corporate America is jumping on the voting bandwagon. Some companies, like designer fashion brand Tory Burch, are donating proceeds from limited-edition “VOTE” branded merchandise to get-out-the-vote programs. (Kate Kelly and Sapna Maheshwari, New York Times). Restaurant chain Shake Shack is giving away free French fries to all customers that vote early.

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Corporate Governance, Featured Topic, Trending TopicsRace to the BottomAdriana Levandowski
Trade War or Tech Cold War?

President Trump continues to escalate the United States (“U.S.”) and China Trade war. President Trump has expanded his campaign against China’s government by going after Chinese tech companies, jeopardizing the future of technology and innovation as investors must navigate cross-border tech investments amidst trade tensions. (Kevin Cirilli, Bloomberg L.P.) The Trump administration’s campaign to slow money flowing from investment funds into Chinese companies is not easing anytime soon, as U.S. politicians continue to claim venture capital funds and endowments have directed growing potions of their investments into Chinese companies linked to human rights abuses and national security threats.

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Deals and M&A, Trending TopicsRace to the BottomPaige Pashea