Transcript
Welcome to shareholder Primacy from free float media about guests about activist investing Securities Law, and all the ways, the financial legal world's intersect and Collide in real life, Anna. And I are here and is a law professor at the University of Colorado. Beaches and research is Securities and business laws. You holds up the legal end of our podcast. It's Michael Levin, an activist. Investor who lives and works in Chicago. He covers the financial side of our podcast. Let's talk about a couple of recent developments in how companies make life, a little harder for shareholders and activists. We have an interesting situation, involving care, Mark and Paramount, the owner of CBS among other things. Those are the ones right hand who just cancel their favorite. Stephen Colbert. Yeah. But they still got another year under contract. Yes, correct. Well, there's there's an interesting angle to this, where there's a potential lawsuit and so forth that will dolphin to. And then we can also look at how companies make life hard for shareholders. With respect to advance notice bylaws and this is at Cracker Barrel. Um, so yeah, we'll talk about those two things. Okay. And Also, just a reminder. to throw our mailbag, we Have you'd like us to discuss. You can email us at shareholder, Primacy at freefloat LLC. And we're actually going to be talking about one of those emails today when we talk about Paramount and this threatened care Mark situation. Yes. And we can also mention that we are about to embark on a little bit of a break for the rest of the summer. The only gonna be a couple of episodes posted between now and like the end of August, we're skipping next week. We'll have one the week after and then probably skip a couple weeks. So anyway so we're hoping you enjoy the rest of the summer as much as we plan to and we should be back in a full schedule. The last week of August so with that kind of housekeeping, out of the way, we can get into the substance of white people, listen to us, and Earlier previously on holder prime minister, we talked about the obligation of directors at least of Delaware Corporations to like follow the law and make sure their company follows the law. They can't like intentionally cause a company to like break law state federal law, and they also can't intentionally ignore law breaking. And in addition to all the criminal repercussions from that that flow to a company, this gives shareholders a cause of action shareholders can sue the company sue the board for breaches of something fiduciary duty I suppose. Yeah, for not supervising lawbreaking at their corporation and that that's come up a lot, I guess has it not. Yeah. It's, it's their hold is a brought a lot of claims. I think it actually goes back. This is part of the reason companies have been sort of dissatisfied with Delaware that some of these claims are getting more traction. So, yeah, we talked about the doctrine on a prior show and one of the things we said was that it's an odd fit for Delaware because law breaking. It's bad, but it might be intended to benefit shareholders. It's often done. So the company can increase profits. It might actually even if there are penalties in the end, it's still making net out after we've. After we've defended someone and sent like a middle middle level person a device, president Charges going to jail. Yes, we treat shareholders is the injured party. That is a right to sue over lawbreaking. Even if they lobbying all told it up with a net positive for the company and it's awkward for Delaware because it means Delaware has to kind of step outside its Lane and act as a regular and administer like communicating adjudicating Criminal. Exactly like a chance to record. Yeah, right. Because shareholders can sue even if there hasn't been a finding of liability, so this is the Fox News suit. That's pending right now. Shelters are suing accusing Fox News of defaming dominion because but Fox News has never been found guilty of defaming dominion, right? They just settled they settled that case. Exactly so if this proceeds and we'll see how far it gets but if the case proceeds it means a dollar Court would have to determine if there's defamation in the first place. So the whole point is that it makes Delaware step outside its Lane and and this is always been this has been awkward for Delaware and there were recently headlines sorry there was a headline about it I think about meta, right? Yeah. Yeah. Because there was a claim against meta claiming that it it's board intentionally violated the law by violating users privacy and you know sort of eight the penalty in the end but it did this, you know, essentially to increase profits it ignored privacy laws and a shareholder suit over this. And literally after the first day of trial, it was scheduled for like a really long trial. After the first day, they announced that they were settling and we don't know the details of that settlement, yet they'll be made public eventually. But honestly, I feel like Delaware itself dodged a bullet. So that was, that was like a little disappointing, wasn't it? Me personally, I was Like I was getting ready with my popcorn but I'm ready to sit ready to sort of hear what how Chancery might have ruled or at least how the evidence works. The procedurally probably would have been interesting. Exactly like how that unfolded? Yeah, because none of these cases are actually gone to trial. So we we don't really know how these intentionally break the law cases play out in trial, but that is actually not the situation that has my attention this moment. What does this moment is Paramount? Yeah there hasn't been a camera case against Paramount but one has been threatened and as I said before when describing it I'm actually gonna Circle back around to a male back question, we got about the duties of Diversified institutional shareholders like mutual funds and what duties, they owe to the investors who hold shares of their funds which sound is far field, but they come together. You're gonna connect the dots. I'm going to connect. So we've all heard I'm sure you've heard about this Paramount. Merger. Paramount has a dual class, share structure. The controlling Shares are held by Shari. Redstone, she wants to sell. She's agreed to a merger with skydance and it's differential compensation. She gets 2.4 billion dollars in cash for her, High vote shares and the public shareholders, get mostly a combination of cash in stock. And the stock is in this new entity that becomes the parent of the old and buyer, the buyers Larry Ellison's son, so is Larry Eros and Sundays, right? That's just in case people need to remind Ellison is helping his. I understand his son by a media company but the deal has been stalled because the FCC has it hasn't given its approval to transfer Paramount's broadcast licenses to this new entity at least as of this moment. I mean, you know, as far as I know, the headlines today will be. They agree. It hasn't happened. So, um, just went Paramount was seeking this FCC approval. Donald Trump had this pending lawsuit against Paramount, because he claimed that The 60 Minutes show on, CBS had deceptively edited and interviewed with Kamala Harris that ran during the presidential campaign in order to make her look more articulate than she actually was. So he had this pending lawsuit and every commenter agreed that Trump's claims were legally frivolous. I mean they were just silly. I mean just from the idea that the inner oh I kind of First Amendment basis first, whatever he claimed that this was Consumer Fraud. He was suing for billions of dollars in Consumer Fraud personally because of a dissent allegedly deceptively and it's just it was it was So it was very silly the from the idea that was deceptively edited at all to the idea that he would have standing to bring billions of dollars, but also, I mean, everyone did it, but there seems to be this understanding that the FCC was never going to approve this merger. Unless Paramount agreed to pay Trump some settlement to resolve these very silly claims. So, caramel, did settle it paid about 16 million to Trump's Presidential Library and now skydance really hopes that FCC is going to approve the deal, right? So hopefully the deal will now go through now that as far as probably a Paramount shareholder but should I apparently no longer is the show. Maybe this looks like Paramount bribe Trump to get merger approval. So as soon as this was reported, the freedom of the press Foundation, which happens to own shares in Paramount, threatened to sue as shareholders of Paramount over this bride. So let's take a moment to think about this now, first, I'm not a Crim scholar, I don't know what counts as a bribe or not. I'm just going to assume for the purposes of this discussion that there really is a real case that this is a this payment did violate an anti-bribery law. I don't know that it did. I am assuming that it did for the purposes of discussion that there's a violation of loss somewhere. All right, it's obvious. Why the freedom of the press Foundation, we want to sue because for them, this is a threat to journalistic Integrity, but if they do file a lawsuit, as they threatened, they'd be doing it as shareholders, not as journalists. And this is the conceptual problem with camera, which is a, rational economically, motivated shareholder might be totally fine with breaking the law and service. There's there's Paramount shareholders that just want this thing to be. They just want to exactly. So you have to Ask whether a shareholder, really is an interest as shareholder. So that leads to a sort of the hypothetical question because the suit hasn't been file. Yet maybe it will be do Paramount shareholders, have a reason to object to this payment as shareholders, not as journalists or members of society, right? Or is, or okay. Yeah, thank you exactly. So it's this is this kind of a cost that we should bear. I don't know very much shares but exactly. And one reason shareholders might legitimately reject is they think it's a crap mercher. I mean there's there's been so some chat at the merger isn't as good as a good event but exactly a lot of the public shareholders are claiming that all the consideration is going to share, right stone at that. They should be paid more for their shares. So if you have corrupt payments on top of it to push the merger through that just adds insult to injury and they're actually there's a merger objection case pending right now that's already been filed and I would not be surprised to see this whole oh again, Paramount against yeah, they're just to object to it, run like on economic and a fiduciary basis. This is a conflicted Action. The controlling shareholders getting different consideration. And it's judged under developers old standards, which makes it easier. So maybe we'll talk about appraisal sometimes soon. Yeah. Could we make people? We'll see what happens at this merger. Go through but let's do a thought experiment. Let's assume that you didn't object to the merger price. Let's say you liked the merger price. Is there a reason Paramount shareholders as shareholders would object to this bribe? I say with air quotes, if this payment was the only way to get approval. Well, this is where we get to this question of shareholder duties and diversify your holders because Jeffrey University, not Columbia broadcasting yes. Columbia University had a blog post about this and his theory was shareholders, should care even if they like the merger because their shareholders of other companies. And if Paramount executives are allowed to pay this fry, then that will encourage the administration to make similar demands and other mergers, maybe file, more, frivolous lawsuits and ultimately, this could be very disruptive for business. But if shareholders successfully sue, the power up board and established, the boards are not permitted to make these payments then that means future boards won't be subject to. Everyone knows these payments are off the table. There's presidential, is that how would you say it? Yeah. Okay go ahead. The idea that all established that boards can't make these payments and that will dissuade future similar demands from the administration which is I have to say kind of why you know Trump suddenly declared that the United States wouldn't really be enforcing the federal Corrupt Practices Act. The announced that they wouldn't be enforcing really somewhat. The foreign cars, those are bribes. Paid people just painted his not to his Presidential Library. Yes, there are other Credits. Not Great for American companies. Well under American law and when you announce that you're not going to enforce that law. Now it's very hard for companies that do a broad in foreign countries to say we can't pay you, it's illegal under federal law because those countries can say well didn't your president just say he doesn't care anymore. So he likes Pride. Anyway. About this argument that Paramount shareholders should care about it because they are shareholders of other companies. Is that it's not about maximizing value at Paramount, it's about maximizing, the value of a diversified portfolio that includes Paramount. The argument is that shareholders of Paramount might forego or delay? Valuable merger consideration in order to maintain a corporate system that's overall beneficial. And the reason this struck me is because we this is an idea we talked about on the show before when we talked about the macritchie versus Zuckerberg case. That's another show we did where MC Ritchie alleged. That Facebook's board was violating its duties to shareholders because the board made decisions that maximized Facebook's profits at the expense of the broader economy, which ended up harming Diversified shareholders. Who held shares in other words and that argument didn't get very far, it did not get very faster, but yeah, yeah, exactly. The court did what the court? The only, The court did could do which is projected, he held it that I sent her Laster held legally aeboards duty is to care. Only about one company not a diversified portfolio but that leads to the mailbag question which is what about the Diversified shareholders. If you're an Institutional Investor like BlackRock and you hold a diversified portfolio on behalf of investors in your funds must you as a diversified investor, make voting decisions and I guess lawsuit decisions based on what benefits the portfolio overall, even if those decisions aren't wealth maximizing at a particular company, so that was actually our mailbag. Question does BlackRock have to care about the Diversified effects of the portfolio and the answer I give with Paramount of the jumping up point is yes and no. Yes baby BlackRock does, I think that's right. It has a duty to maximize the value of its funds and that could theoretically mean like Jeff Gordon, argues reducing systemic risks, even if doing so doesn't benefit individual companies like climate change. That's a systemic risk. If you reduce it, you benefit a lot of companies. BlackRock might have an interest in combating systemic racism, which costs the economy trillions of dollars. Overall, even if the benefits at one particular company are high. Yeah. Yeah, or the costs are hired one. Yeah, exactly. But the rub on that argument is and we talked about this and we talked about the macritchie case, BlackRock doesn't hold one Big Font, it holds lots of different funds with this interests in many different right different. And some might be vulnerable to different systemic risks. So if BlackRock is going to seriously, think about the systemic risks that affect the Diversified portfolio would have to go on a fun by Fun basis. And it's not clear that it really can do that. That has the information that would be like impossible. I mean it real hassle, it would be very complex. So this now that said, and this is an argument against Jeff, Gordon is made. We can see today that the structure of public companies really does Bend toward what Diversified your shoulders want. So, for example, today companies take on a lot of Leverage to make cash payments to shareholders, that's what you want if you're Diversified, because you're not concerned about the risk of anyone company, the conglomerate which was intended, which was justified as a sort of something to some extent, it's sort of a risk advisory Yeah, on that's died out because shareholders can diversify you don't need the company to diversify. So, in many ways, the structure, the public corporation, today does take the preferences of Diversified children into account, but so that so that's my yes or no question. Answer to the mailbag, but I will finish with say, even if it is better for Diversified Paramount shareholders, if they sue the board, For bribing Trump right over and and invoke Caremark, right? Yeah, yeah. Even if they did, they have another problem standing in front of them, which is that the shareholders are Paramount will not be shareholders of Paramount. Once the merger goes through, they're gonna be holding cash, or they'll be holding stock in a new entity, which will be the parents. They won't have, they won't have we, as we say standing, they will not have standing. That's too kind of soon. Yeah. Even then they lose it. If you even if they follow the complaint tomorrow, they would lose standing once the merger goes through. Because the point is that this injured Paramount, you're, you're suing is a shoulder a Paramount saying that this injured Paramount, but you only have standing, they make that argument. As long as you're a shower of Paramount, if you're not a shoulder a Paramount anymore, you have no standing to make that argument. So so if this merger goes through any time on, what the timeline for a lawsuit will be, it's very possible. They'll lose standing now. There are Some arguments around that. So I don't want to like prejudge what like strategy they might adopt but it's it's a real hurdle that stands in their way that like on the eve of a merger. It's very hard to bring a derivative on behalf of the company. Yeah but that's happened before okay, they've lost standing like along the way but I'll just finish with. I don't think this issue is dead because When we really see the actual merger objection get litigated out, I would be surprised if those plaintiffs didn't fold this in. Oh so it to include yeah because they just don't like the prior allegations that this is a bribe and that's gonna be complicated anyway whether the settlement of lawsuit surprise but that'll be right. I mean like I was assuming it's a bride for the purposes of this, right? You made that stipulation as we said earlier. Wow so there so we'll have to follow this because there's you know, we'll see who's who over what? Including possibly the restaurant Foundation. I mean there's actually yeah. All right, so maybe you'll get your camera Trial after all some version of something like it will have to say. All right. Well, let's um, let's let's think about that a little bit during the break and we can we can then turn to the other subject we wanted to talk about. How is that? Okay. All right here at shareholder Primacy. Sure, holder Primacy is brought to you by free float, analytics.com. The only free database of corporate directors their influence and their performance. If you want a stalker, retirement plan, go to freeflow analytics.com and look up which of your elected directors are performing well and which aren't use your vote in the alternative democracy and get your data at free flow. Analytics.com. Now, back to the show, Barrel. If you eaten at a Cracker Barrel I don't believe I ever have, you know? Yeah I live. Yeah I Live Now in Louisiana. I'm sure that they have them but Louisiana It hasn't credit change. Yeah, so yeah. So I've I haven't eaten one quite a while but you know, it's kind of old timey. They have this enormous gift shop and it's, you know, it's kind of like highway rest stop kind of stuff, right? But it's Cracker Barrel, it's a nice place. You know, it's good foods decent, but you know, Cracker Barrel's, public company. They have a shareholder who's really kind of interesting? And they don't like that shareholder. Very much for reasons. We're about to hear. And so they pioneered a couple of new ways to kind of make life hard for that shareholder and potentially, for all us shareholders boarders endlessly, aren't they really, really resourceful here. So Cracker Barrel, a couple months ago, approved amendments to its bylaws, and the advanced notice terms of its biologic to do two things. And then we'll get into kind of the why? And whether how this might matter to the rest of the world. As we talk about it, the first was, it basically requires an activist you could say, but just say, active as here, because that's really who's doing it to get a material amount of support in a given proxy contest in order to continue to do further proxy, contests, right? So you see, you got, you gotta get, like, hit some sort of minimums, which will talk about. So is that repeat contest? Yes, it's about cereal or repeat. Yes. So if I run a proxy contest at Cracker Barrel now, but potentially other companies, what do I need to do? What, what kind of success do I need there in order to do it again? Like the next year, or the year after that or something? And then the second. by law Amendment, had to do with reimbursement of proxy contest costs, And essentially. they're going to require an activist who sort of fails to get certain amounts of voting support, require that activists to reimburse the Cracker Barrel for the for Cracker Barrels, proxy contest costs. And then In fairness, they decided to write that bylaw amendment in a way where Cracker Barrel will also reimburse the activist if the active is succeeds in certain ways, but they don't repeat contest. It's not yes, for repeat guys. And that'll become important to our discussion about whether this kind of has legs. But before we talk about those, it's worth kind of setting the stage about the players. Because it really interesting. Well, I mean Cracker Barrel's not that interesting. I mean, Cracker Barrel is you know it's just a restaurant chain, you know it's it's done. Okay. Its Shares are up, this year's her down, you know? Last Four or five years, it's got the usual board of directors, and some entrenchment, blah blah blah. Its shareholder is. Kind of fascinating fascinating. Sort of a perverse way. Its shareholder is a company called biglari Holdings. Have you ever heard a big Larry Holdings before we have but only because they've gotten it. I think they once got into trouble filing. An HSR notification when they increase they might have it might I mean they've been all over. You'd be Larry Holdings is a really Weird weird. It's public. Company trades under BH. It's run by this. Guy Sardar. Biglari, who is the CEO? It's based in San Antonio, Texas. He's I think he's in his early to mid 40. He's been doing, he's been running it for 10-15 years, so we started when he was quite Young. He kind of fancies himself as sort of the next coming of Warren Buffett. Okay, he's got this kind of non-financial holding company. That owns a bunch of operating businesses. He's got some insurance subsidiaries that throw off cash. He doesn't take any comp the way Warren does. And the website is very, very sparse as and, of course, there's the initials BH which also is Berkshire Hathaway. So there's a lot of, you know, a parent, potentially, deliberate similarities and the businesses. He runs are Steak and Shake, which was kind of his original really successful, turnaround in an activist situation. That worked out really well. He's owns a company called Western Sizzlin. This little kind of restaurant chain. That wasn't such a great activist situation. But eventually got it, got some oil and gas companies that was insurers. He also owns you remember Maxim magazine know, I am aware of it. Yes, a magazine. He owns that And evidently that's that's part of the you know, it's it's I think it's probably past its prime. Now there's all sorts of other better, better ways to kind of get that kind of media. But anyway, he owns Maxim magazine. BH has done kind of over the past like 10 years compared to Berkshire so that's that's big lottery. And they've done some activists stuff right now. They have an activist project going on, potentially a Jack In The Box and all so play a local, just two other restaurant chains. And so he just, you know, started our nose is activism, you know, his bylaws, he knows boards, that kind of stuff. He's also been. A long time. I'm going to guess irritant at Cracker Barrel. He has run. No fewer than six proxy. Contests. Oh wow at Cracker Barrel. Four in a row from 2011 through 14, another one in 2020 and then one in 2024. He hasn't won a thing there. Yeah. So it sounds like these are unsuccessful because oh yeah. Right. I mean, he's his vote totals of range. I mean, one year, it got like tiny, but it's been secretly between 10 and 30% of the vote for him and potentially one other nominee in 2011. He ran, he demanded and won because he had enough shares a special election. And the agenda item was to see whether the company should sell itself and the agenda item failed. So anyway, so you could sort of see if that's a thing about Cracker Barrel. That I think it's with 20% you can call a Chevrolet, right? So interestingly Cracker Barrels. Um is a Tennessee Corporation? Yeah, I don't know how much Tennessee corporate law. You've dug into nobody, I don't know. The Tennessee knows what its corporate laws but yeah, right. So anyway so there's very rules there. So anyway, so that gets us back to the advancement of biology changes which are worth kind of delving into for a second. So, Um, the first one was you need sort of a minimum vote. So and Cracker Barrel kind of designed this. Clearly with big Larry Holdings, they aimed at bylaw at the glory. That doesn't actually say big Lauren, okay? So, essentially in a given AGM if a nominee, so this is this particular Biola is nominee Center. If a nominee fails to win at least 20% of the votes cast, that nominee is precluded for standing for election at the next three agms. If that nominee wins between 20 and 25%. That nominee can't stand for election at the next two. This is people named big Laura who nominated herself. I mean it could be people named, you know, Levine or Lipton too. Right. So here's what happened is that and it also I mean I suppose there was legally proper. This also applies to incumbents two, he plays anybody's not right, right? Whoever the nominee is bored or not that nominee gets these low votes. They have to take and if you're precluded Oh, that shareholder can nominate others. So this Appliance nominee, well, as it happens. This works retroactively. So the Bilo was passed like in May of this year, but it applies to any it applies to the AGM from 2020 or 2022 or 2024. Well, in 2024 started, our big Lowry stood for election to the board and one 18% of the votes. Well, 18. So is that one, he presents, he personally can't run himself for director for another three years for well in 2025 and that age and Morty happened. So really two years 26 or 27. So he so he now personally cannot accordion. If this bios enables, we'll talk about that in a minute, he cannot run. He personally cannot run for the board in the next at the next two agms. Assuming they're in, 26 and 27. All right, so let's talk about the reimbursement one, which is even a little more interesting. Okay, For an activist again. So now we were forget the 20% through this is a straight 25% threshold. So this is now this applies to the shareholder, not the nominees right here, sponsoring a nominee, yes. Correct Shirley's making them which could include himself is Big, Larry holding stood, but anybody else. Okay? But this is a shower, this is again, this is a big lottery Holdings but we'll take them out of this for the moment if any, if all of that, Shareholders nominees fail to win at least 25%. Okay. Um, then So we're going to mark that. Then at the next AGM, when that show holder nominates. directors again, if all nominees again fail to win at least 25%, then, So it's two in a row. The activist has to reimburse Cracker Barrel for that for Cracker Barrels. Proxy costs up to a limit of 5 million dollars. Which is a lot of money that's that's I don't know. I mean I didn't look what Cracker Barrel Cracker Barrel has been spent that I don't think and I'm pretty sure big lottery is neither. So anyway, so they're going to try to collect that from the shareholder. Again if the second proxy contest fails Okay, fails to win. And again this works the same way if the shareholder wins at least in the subsequent and that second proxy kinds. If they win a seat, Then. A Cracker Barrel reimburses, the shareholder for their expenses. Again, up to a limit of 5 million dollars. So, you know if you if you get over 25% but don't win any seeds, I guess what, between 25.50 or whatever. Depending on however you voting works. Then we're just kind of we'll call it and this is. Yeah. So this is after an unsuccessful contest, right? The next one, you have these reimbursements so let's go back to biglari in 2020 for okay. Again big Larry one 18% because I Holdings. Not sorry well starter but big Larry holding Sheryl holder one 18%, Which is less than 25%. So If in again, 25 meeting is passed if in 20206. But Larry holding his nominees directors because of what happened in 2024, because this is a five year period, okay? And big Larry Holdings nominees each together fail to win at least 25%. Then big Larry Holdings will need to reimburse Cracker Barrel. For its proxy contest cars and but if they get over, if they win or if they win. Yeah, right. Absolutely. So it's just such it. I mean, it's just so interesting. It's so geared directly at this repeat issue. There's no cost sharing shifting or any kind for the first contest. It's only after a first contest that's not just failed, but faild, a lot, right? So there's actually kind of I have several questions and maybe you can kind of help with some of these first. How would Cracker Barrel kind of plan to collect? So, suppose 26, Larry does this and fails and ozone 2 million bucks for whatever five? I don't know. Maybe of course treat these bylaws is functionally a contract. So oh interesting. Okay. I mean, I don't I I wrote a whole paper more than one paper. I don't think they should be considered contracts. That doesn't necessarily mean this would be right Force. Bowl by, but a lot of Courts increasingly are saying, is this is a contract, is it now? I've never seen it work as a contract. To then be able to sue the shareholder for costs. But if you take extend the logic out, how did he, how does your answer change? If the advanced notice by law terms, we're just amended along to provide reimbursement to also include in the notice letter. That the, that the shareholder commits to set forth and undertaking at some sort of air quotes that the activists will reimburse. Does the well then that firming it. Yeah, so that. So that's another way I guess. Like, it could be as part of, like, in the same way, you have to fill out a questionnaire, you have to disclose your sponsors. Are you have to not be hedged or whatever the other? I don't know what? Apparently be you have to prompt. You have to actually write out an actual promise. Okay. So evidently that's in the notice letter that I. Yeah. So maybe that that that that's strengthens the kind of the contractual nature of the, of the of this presumed agreement between yes, and then you would see that the way you collect is you sue as a contract, like, right? You shoot a collect of course. Sure. Okay. Because, you know, I was thinking maybe you should Cracker Barrel like require a bond, you need to send send a 5 million dollar bond in with your notice letter. Well, that would be yeah. Wouldn't that be anyway? So My second question is, is this, like, even legal can companies kind of do this? Your Cracker Barrel do this well, Tennessee, allow this see who the hell? No. Okay, wait a second. Everybody on this everybody all our listeners. Nothing. This is legal advice. So nobody. But yeah, it's yeah, it's it's fantasy. So we don't know. So, like, I fall back on Delaware. And my answer is I have no idea. Um, so so first of all, when I look at this, the so okay. What Delaware? I've never seen anything exactly. Like this certainly not one of the things to note about it is that it's really narrowly tailored at one shareholder certainly but oh I would say at a particular problem like and it depends on what you frame. The problem as the problem does not seem to be the board afraid of losing their seats which is usually the issue. The problem is literally just the expense and headaches of having to constantly of having a deal. With this guy who doesn't have shareholder support, who is actually draining essentially. Me Resources with repeated failed challenges. Now, if you frame it that way, and I don't think that's unreasonable. I think the board, like, has pretty well established that they don't have any actual fear of losing their seats from this. If you frame it that way, then then you under Delaware law. If that is the threat to the corporation, the threat that they are defending against isn't. Oh, we don't want to lose our seats. If the thread is Unreasonable expenses, being inflicted on the company, right? It has on shareholders, have a vote, you know, shareholders. The first three times shareholders probably could have had a conversation with starter and say, okay, do you get it now? We don't you. So if you frame that as the problem that they're defending against, then this I gotta say and if somebody who's pretty, you know, sympathetic to activists this looks like a pretty tailored solution. Yeah. Like it's it's specifically aimed at repeat contests, not initial contest. It requires the only way it kicks in and inflicts. Any pain is if somebody gets not just doesn't win, but seriously, doesn't win in the repeat, contests, to some extent, they're eating their own cooking because their own nominee. I mean, I don't know, right? So, so In and given the history that they're defending against a very real specific threat. It's not obvious to me that this is would be a problem under Delaware law. Now, what you are not allowed to do is adopt an advanced notice bylaw for the primary purpose of interfering with a shareholder vote. But I think there's a case that that is not what this person. It's not it appears to be happening here. I'll note that um, you know, this framing of time out if you don't get many if you don't get a lot of support that's taken directly from federal law. The 1480. Yeah, that's that's I was gonna say that. There's there's, there's there's a very relevant precedent that we've got around directly. Elections are on DirecTV proposals. Yeah. We're yeah. You got to keep increasing your support or you're not exactly it's and it doesn't kill you if you just don't win but if you don't win by a significant amount then then you get time out. So I so it's not obvious and also know and this is why I mention that they allow Chevalier meetings is that I don't think It's required under Tennessee law that they were. As I understand times Elon, I don't know that anyone, but I certainly am, not sure that. I'm right, but Tennessee, law has a default requirement that you allow shareholders, with 10% to be able to call a meeting. But you can change that in the charter. And I think that means I don't want to, I don't want to, like, swore and stigma. I think that you might be able to, therefore, get rid of it, which means if they are, allowing us to call me with 20%, that's a choice meaning, and it's a shareholder, friendly Choice. They're allowing shareholders to call me. So it's not like this is a board that, you know, is being Draconian in general about defending against shareholders. So my instinct is that this precise set of bylaws given this precise context. Delaware is very sensitive to. Well, what was, you know? What was the threat? Did you really identify? A threat was an abstract? Or was it real would be okay? That's my guess. But I don't know for sure, but of course, if they were to they, you start varying it, you start making it to not just that is that is that the interesting thing to try to think about is, you know, our company is going to kind of copy. Yeah, and if they did, what would what would that look like? And then that's when we start to get like if they don't, you know, like first of all, I don't know how often like you tell me like how often is it that somebody other like those repeat contests like this, especially with losing by this. Maybe a couple years in a row? Yeah. But you know most most activists, you know, really low support. I mean like, you know, So it strikes me that this is they're dealing like so the reason this particular set of bile is in this particular situation doesn't bug me is because it looks so specific to one particular actor who really is inflicting costs on the company, but if other companies try to copy it they're not going to be looking at the same situation and the word. What I'd be worried is that they'd be tempted to broaden it to make it or make the thresholds. You know the threshold a lot higher make it you know suddenly you know reverse the cost reversal on the first failed contest rather than the second and on and you know, but the the Securities, the bylaw drafting bar, loves his stuff and they're gonna, I mean so so there's, you know, conceivably going to be numerous meetings this fall when board starts to say which are bilas look like where you know, some of these just see this and they're going to yeah, like I mean that's what I would be. Sort of looking out for like to other companies try to do this but much more you know much less in response to a very specific problem. I would aggressively proactive and if it happens if somehow there's this you know, bunch of companies do it again. Most activists are not just going to worry too hard because you got to be really a serial But there's a limited to cereals that, I mean, it's symbolic, there's company, I mean, there are companies out there that do anything, they can to make life hard for activists and this could, this could, this could be part of it. so anyway, Wow, good. I'm glad I asked that. I was kind of wondering how it would. You know what? Delaware, am I think of this again? Just my guess know. That's. And I think it's a very good educated, guess legal advice, not investing advice. Good educated guess. All right. All right. Cool. Shall we wrap up an? I think absolutely done this enough. Let's do that. Terrific, talking to you once again about all this stuff. We will kind of return to advance notice bios. Probably a little later in the year. A couple quick reminders as we said send stuff to the mailbag shareholder Primacy one word at free flow, one word dot LLC and we will consider your questions carefully and maybe read some on the air. And then second we're going to be taking a little bit of a break. There will be probably one more podcast posted sometime in August and then we will resume the last week of August. So we hope everyone has good a break as we're planning, this is shareholder Primacy hosted by and lifting and me Mike Levin. I'm an independent activist investor and advisor to investors about their activist situations and is the incoming professor of Law and Lawrence. WWE chair of Business Law at the University of Colorado, law school. You can find me Mike at the activist investor.com. And at new website, law, web one word, l a w w e, b.com colorado.edu our podcasters producing distributed by free float media. Thanks For listening.