The week in investor relations: US enters bear market, BlackRock’s success in voting efforts and three-for-one stock split at Tesla
– Monday saw US stocks close in a bear market, following ‘a dramatic late-session sell-off,’ according to the Financial Times (paywall). The paper reported that Wall Street’s equities benchmark the S&P 500 had dropped 3.9 percent to close at its lowest level since January 2021. The move left the index more than 20 percent below its January 2022 all-time high, a commonly identified benchmark for a bear market.
– The Wall Street Journal (paywall) reported that BlackRock’s efforts to get institutional investors to vote their own shares is taking shape, with its voting-choice platform having added investors representing roughly $120 bn in assets since its launch in October. BlackRock launched the program in response to feedback from clients who said they wanted more control over voting. About 45 percent of eligible investors have expressed interest in the platform.
Asset managers typically vote on shareholder proposals on behalf of investors in passive, index-tracking funds, giving them enormous sway over corporate decision-making. Firms have used their influence to push companies to improve diversity and cut their dependence on fossil fuels, among other things. Their stance on social issues has drawn complaints from some corporate executives and lawmakers. A group of Republican senators last month introduced a bill calling for individual investors in passive funds to have the option to vote their shares.
– Tesla in its proxy statement revealed it plans a three-for-one stock split and that board member Larry Ellison does not plan to stand for re-election, according to CNBC. The company wrote of the proposed stock split: ‘Our success depends on attracting and retaining excellent talent’ and ‘highly competitive compensation packages’ offering every employee an option to receive equity helped Tesla do that. ‘We believe the stock split would help reset the market price of our common stock so that our employees will have more flexibility in managing their equity,’ the company added.
– In other Tesla news, CNBC reported that Elon Musk has appealed a judge’s refusal to end his 2018 agreement with the SEC requiring a Tesla lawyer to vet some of his posts on Twitter. A court filing states that Musk will ask the 2nd US Circuit Court of Appeals to overturn the April 27 decision by US District Judge Lewis Liman that allowed the agreement to stand. The SEC declined to comment.
– A bill intended to specify the rules and roles for crypto regulation could inadvertently ‘undermine’ other market protections, CoinDesk reported SEC chair Gary Gensler as saying. Gensler was speaking at the WSJ’s CFO Network Summit when he was asked about a bill introduced by US senators Cynthia Lummis and Kirsten Gillibrand last week. Gensler said he would rather speak to the lawmakers first, but that from his agency’s point of view, ‘what we wanted to do is to continue to protect’ the role his agency plays in overseeing how companies can raise money from the general public.
‘Frankly, if I can turn away from the legislation, we don’t want to undermine the protections we have in a $100 tn capital market. You don’t want our current stock exchanges, our current mutual funds, our current public companies [to] sort of inadvertently by a stroke of a pen say, You know what? I want to be noncompliant as well, I want to be outside of the regime that I think has been quite a benefit to investors and economic growth over the last 90 years,’ the publication reported Gensler as saying.
– Reuters (paywall) reported that the Basel Committee published a detailed checklist for banks to assess how climate change affects all aspects of their business, including pay and capital. International banks will be expected to examine whether they are quantifying risks from climate change properly, despite sometimes patchy data and time horizons that go beyond traditional risk assessments and remuneration packages.
The guidance is the latest effort by regulators to review how their rulebook covers climate change in a sector at the forefront of efforts to transition to a net-zero economy. Banks must look at how risks from climate change affect their business strategy, training of senior staff and board members, internal controls, capital and pay over the short, medium and longer term, according to the guidance.
‘The board and senior management should consider whether the incorporation of material climate-related financial risks into the bank’s overall business strategy and risk management frameworks may warrant changes to its compensation policies,’ the Basel Committee said.
– As market losses pile up, ‘there’s bad news for first-time fund-raisers,’ said Institutional Investor, reporting that some allocators say they won’t put new money to work in inaugural funds. ‘The chill’ comes after years of allocators being more open than ever to emerging managers, alternative metrics to judge the potential of new firms and new investment ideas – particularly in private markets, said the publication. Now however, ‘the tides are turning’ for asset owners, which say that while they are not checked out completely, they are keen to remain on the sidelines.
– The head of Morgan Stanley’s China securities business proposed setting up an international board in China to allow offshore-listed Chinese companies and foreign firms to list in the domestic market. That’s according to Reuters, which reported that Jing Qian, CEO of Morgan Stanley Securities (China), also told the official Shanghai Securities News in an interview that China should consider lowering the profitability threshold for IPOs by tech companies and start-ups.
The proposal comes as a growing number of US-traded Chinese companies conduct secondary listings in Hong Kong as a long-running dispute between China and the US over audits threatens to kick them off American exchanges, explained the news agency.