Healthcare Consolidation – A Boon to Executives
When two medical companies get together, good things can happen
– at least for the executives involved. After the
announcement of heart-product maker HeartWare merger with heart disease
treatment company Thoratec, several members of HeartWare’s
executive team entered into a retention bonus agreement. The
largest payout, over $3 million, goes to the CEO, but only if the
executive stays employed through the closing of the merger and the
entrance into a consulting agreement. Coincidentally,
Cardiovascular Systems Inc.’s very recent takeover of biotech
specialist Replidyne also triggered retention bonus agreement payments
to its executives.
Unfreezing Debt Markets: Natural Resource Companies
A trend has developed within the natural resource industry:
many companies are issuing debt to raise capital. Oil giant
Chevron’s $5 billion note issuance and Plains Exploration and
Production Co.’s $350 million 10% note issuance serve as
solid examples. JP Morgan and Bank of America are among the
underwriters for Plains’ issuance, and Barclays and Morgan
Stanley are underwriting the Chevron issuance. Each
company plans to use the proceeds to repay borrowings and to put toward
future capital expenditures.
Amended Bylaws – Electronic Shareholder Notices
With a nod toward the mandated use of electronic proxy filings, many
companies are now amending their bylaws to allow for electronic (i.e.
email or web-based) notice of shareholder meetings. The potentially
paper saving (and perceived “green”) move allows
New York-based glass and semiconductor maker Corning and coffee house
Starbucks to email shareholders the companies’ plans for
their annual meetings.
Silicon Valley is Under Water
Everybody likes bonus compensation, but when share prices lag, options
can become worthless. Google experienced just this scenario
recently, and exchanged 7.64 million of its underwater stock options
granted to over 15 thousand of its employees. The Internet
giant presented the re-pricing as a move to “motivate [its]
employees to achieve future growth” and align the
employees’ interests with those of
shareholders’. Following Google’s lead,
online auction site eBay announced a similar program to exchange its
employees’ underwater options for in the money options.
The SEC’s Rush to Regulate – Credit Rating Agencies and CDS Central Counterparties
Augmenting the push for increased regulatory oversight, the Securities
and Exchange Commission (SEC) recently announced an upcoming roundtable
discussion on its oversight of credit rating agencies. The
Commission plans to focus on conflicts of interest and
transparency. Investor organizations, financial service
associations, credit rating agencies, and other governmental agencies
round out the participants. The SEC also just announced a plan to
improve transparency for credit default swaps and improve their
oversight – which would ideally allow related risks to be
more clearly and quickly assessed. Last December, the
Commission allowed LCH Clearnet, Ltd. to operate as a central
counterparty, and this week, the SEC allowed ICE (Intercontinental
Exchange) US Trust LLC to do the same. Having a centralized
counterparty avoids any subjectivity and allows trades to be cleared
all in one place. Each of these moves gives credence to Chairwoman
Schapiro’s comments asking for the Commission to act like
“its hair was on fire.” There has also
been discussion of the SEC revisiting the uptick rule (preventing
shorting on ticks down). The regulatory rush seems to be
bringing a new era of enforcement opportunities and added focus to
matters long since ignored.
Published: March 12, 2009
