Private Ordering

Good morning, Matt. Mike and Ann here for you. Another episode. Hope you like it. let us know if it doesn't come through. so there we go. All right. three, two, one. Welcome to Shareholder Primacy from Free Float Media, a podcast about activist investing, securities law, and all the ways the financial and legal worlds intersect and collide in real life. So Anne and I have returned. Anne Lipton. is a a law professor at the University of Colorado who teaches and researches securities and business law. She holds up the legal end of the podcast. And that's Mike Levin, an activist investor who lives and works in Chicago. He covers the financial side of our podcast. It's fine. How are you? We email stuff and we text. We also text. It's pretty much all I do, yes. How you doing? How's it going? Good. I haven't talked to you all week. So all we do was all we do was email ideas about what to talk about this week. And we t we texted too. That's funny. good. So I have been thinking a lot lately, and I sh hope you have too, I think you have, about private ordering. And that really that's that that that's your life oak. I'm sorry I suggested it then. like what it means Yeah. It comes up all over the place. I wrote a piece the other day or a couple weeks ago about everything is private ordering. Kind of in the same, you know, after the fashion that our old friend Matt Levine does about everything is securities fraud. And everything kind of is private ordering, isn't it? It just sits everywhere. So Yes, correct. So we thought we would spend some time talking about private ordering today. and sort of see how it affects us and and so forth. Hmm. Well, it's certainly in the corporate and security space, yeah. Okay. Before we get there, a quick word about our posting schedule for podcasts. we will be away next week leading into the Imp Independence Day holiday. and then we will be back only occasionally through the end of July and into August. Probably we'll get one or two done in between our travels and breaks and so forth. So there'll be a couple more Two three in the next several weeks. So if and you just gotta you know, keep checking your your podcast feed to to hear from us. But we're we're gonna be taking a bit of a occasional break here over the summer. At least I am, Anne. I don't know what you're working on. Hm. Yeah. Well I've got other stuff. But yeah, so yeah, we'll take a little bit of a intermittent posting schedule and then resume normal stuff at the end of the summer. Normal activity, yeah. Probably just before Labor Day. We'll we'll think of something. And we have an exciting one cooked up for July where we're planning on doing another crossover with with Matt and Damien from Free Float, but that'll be in a couple of weeks. So so so stay so stay tuned for that everybody. Yeah. yes, so that'll be fun. And also a reminder, we do take emails. You can email us at shareholderprimacy at freefloat.lc. We will respond or talk about your email eventually. We don't always get to it right away, especially because our posting schedule is gonna be off for a bit. But we really appreciate getting that feedback and we will respond when we can. We'll read we'll read some questions on the air even. So anyway. All right, let's go let's go to the meat of the matter. Let's go talk about private ordering. So I have a couple ideas, but what does private ordering connote? What is it when you think about private ordering, what is it what does it kind of mean? i in a sense, just to sort of set the scene here. Usually well something like government enforcing private privately arranged, you know, economic arrangements, private contracts. private economic arrangements that aren't really regulated by the government other than to enforce what the private parties have agreed to. That's generally how I'd put it. Okay, so so so in other words, there's no regulation about what two parties or groups of parties might agree to. are you is it sensible to distinguish regulation from law or do you kind of mean both? I don't distinguish regulation from law. And in fact, this is why I tend to, you know, I I tend to be very skeptical of even the concept of private ordering, because even the way I put it was the government has to enforce it. Like, you know, like this is not like we don't then if somebody breaches their contract, we don't let them go out with a club and beat the other person to death at the other at the end of the day, there's still gonna be legal remedies for what the privately ordered arrangements were if they're breached. And so at the end of the day. There's no getting away from that government hand in the end. And then the government has to decide what it will enforce and how it will enforce and what's too late to sue. So there's never a situation where it's totally hands-off. Nonetheless, the theory of private ordering is we will not have, you know, advanced regulation. We'll just let people make their own market arrangement. Okay. arrangements. Could be in the form of contracts, it could be agreements or whatever, but there's that's actually not as far from what I was thinking about it as as as well. Yeah. Well, I mean, yeah. I mean, and in the corporate and security space, it's sort of the ongoing, endless questions about what you should leave to the private parties to arrange for themselves, versus what should be sort of the government standard, and a government, you know, in advance standard, and what the best set of arrangements are is sort of the through line of most of this field. Right. Got it. All right. And again, it was f f fairly close to what I had you know, and I again the free market economist in me likes the idea of parties being able to exercise agency, you know, demonstrate free will or whatever, subject to some limits. You know, there's there's some assumptions about, you know, related to information asymmetry or related to what, you know, someone's ca capacity to agree to this kind of stuff and we'll talk about that. Yeah, I mean I yeah, I could say that look like on a high theoretical level, sort of the law tends to approach that with sort of the default being we like it when people make their own private arrangements. We should allow people to make that, you know, is it appeals to, you know, that's liberty, that's markets no better than governments, all kinds of justifications where you should start from the position of people can make their own arrangements. And then when you don't allow that or when you regulate is usually either because Right. externalities. There it's not just private between them, right? It's not just private between them. It'll affect other people. So that's like if there's something about the contract that will end up harming third parties, that's when government will step in. And then the other would be paternalism, but that doesn't mean like there's a re but that by itself does not mean that's bad or good, but having a reason to think somebody needs to be protected because they can't bargain fully in their own interest. Like as you say, informational asymmetry. Right. Those I know. Right. Yes. Yes. Right. Well, and and the reason this kind of came up, at least for me, I was gonna say it it comes up for you every day, several times a day. The reason I started thinking about it was because of and we'll talk about this a little later in in our recording here. I started thinking about the new or the proposal to allow companies to report semi annually rather than quarterly. and it it seems to me that that's a Right. fairly emblematic illustration of what's possible in private ordering because there's you know some talk that you know whether companies would in fact only report semi annually and just strictly comply with the law, or whether there'd be some sort of pressure, some sort of agreement to continue to reply, to continue to report quarterly. Or, you know, and there's companies that report more often than quarter. quarterly. Walmart and a lot of retailers have monthly reports of different results. And there's nothing in the law that compels that. So that was one of the things that got me kind of thinking about that. And the other one had to do with all the controversy around precatory proposals lately. And whether regulation, you know, fourteen A eight's gonna persist and whether companies would continue to allow these, even if Right. there were no government no requirement in the in code or in in regul in regulation to have them. And th those those at least those two and many others, there's all sorts of other corporate governance controversies that we can talk and we will talk about. seem to me to illustrate start to illustrate what's possible here, what's possible, you know, the dimensions of private private ordering. So I thought it would be kind of fun to to kind of look at them in this in this context. Okay, sure. and and so and and you know, I wrote you know, and knowing a lot less than than I know today, like at least ten years ago I wrote a couple of blog posts about this. about what you know, s sort of a very rudimentary definition of private ordering and how how it might actually really look. So I'm playing so maybe we'll return to a little bit of that data in in a minute. I think it's worth noting that while we're talking about this in the sort of the securities law and corporate governance and the activism space. It's not confined. I mean, private ordering can apply to almost anything. Is is is that kind of the case? Well, I mean yeah, I it comes up in a lot of it it comes up it's a constant question, like you know, just for freedom of contract in various other kinds of situations. Contracts to arbitrate, or contracts to sell your organs, or you know Right. Right y yeah. Okay. Sure. Employment contracts. Like these are all kinds of places where the you know the debates are how much freedom should we allow people to just make their own private arrangements or how much should we say, No, you can't sell your kidney, or no, you can't work for less than minimum wage. Right. Right. And and the the w the examples I've always thought about outside of security stall corporate governments has to do with like business regulation, business licensing. Where is there is you know, w will parties be able to kind of find qualified, you know, suppliers of things without a licensing system. Yeah. Or or is it yeah. Well, right. And that's and that's a classic situation where, yeah, it's it's both you have a paternalist angle, I mean, depending on the licensing, you have both a paternalist justification and an externality justification. So sometimes licensing might be a way for people to know this person is qualified to do the job. And sometimes the licensing regime is this person is qualified to do the job without polluting the environment or you know, some other externality that like we're trying to address. Right. Right. Right. good. That was a a neat neat way to kind of summarize it. And and then more recently, or even like today, I suppose all the ideas and proposals to regulate AI start to fall a little bit into the realm of of whether private ordering makes sense. I I guess that that I I could imagine you know, a completely free market environment. Again, you get to all sorts of really interesting externalities and You a information symmetries, but yeah. Right. I mean, like one of the basics is like use AI to determine a credit score or to determine who's likely to commit a crime after being paroled. And you might say something like, Well, like the parties can just decide to use this tool, but what if the tool produces biased results or racist results? Then that's an externality issue. Right. Right. Yeah. Yeah. Right. And now I I wanna distinguish here, because this is a very specific attribute of securities law, private ordering from like self regulation, I think. I I I think that's a sensible distinction 'cause th there there might be And I've I've seen at least some accounts where no no no, the securities industry already has a you significant amount of private order because there's a lot of self right, you from FINRA and so forth. There's all these different regulatory bodies that kinda oversee various aspects of conduct. But th th th that's not quite the same, I don't think, right? Well, I mean, yeah, I it it sort of is in the sense that you know, like private parties might decide things like it's complicated. It's we can ensure greater trust in our industry if we agree on a set of principles as to how to conduct business. And that is good bus and you could think of that as just good business, like as in customers know. That brokers are all subject to a certain degree of standard. They're all, you know, and therefore they know to trust their broker. Otherwise, they would spend a lot of time trying to figure out which broker are the honest brokers and they wouldn't go to all the brokers. So that's one way of thinking about it. But another way of thinking about it is that that self-regulation is really their way of staving off actual government regulation, which makes the private ordering in the shadow of government regulation. And a lot of these privately ordered groups, like securities industry. Right, yeah, right. Right. Yes. like Nasdaq, like New York Stock Exchange, they call them like self-regulatory organizations, but they're actually really heavily overseen by regulatory bodies. So like n New York Stock Exchange can't make rule changes all by itself. They have to the SEC has to give some kind yeah. Yeah. Yeah. So so so we're A lot of stuff goes through the SEC, exactly. So so so h here we may be making a dis a little bit of a distinction between the law and the regulation that kinda implements the law. In in a sense. I I I know you sa you said that before, but Well, I don't I don't distinguish. I mean it's all law. It's all coming from the government. But then I tend to also I also tend to believe that there's no such thing as completely private, so there we go. okay, that's fair enough. Yeah, but the externalities are so pervasive and so forth. all right. So so I wanted to kinda mention that that there's you know, an aspect of private ordering that sometimes could be thought of as just we'll regulate ourselves, but you all you're doing is interpreting, implementing, enforcing laws but not using like a government agency to to to do that. Yeah, not using a government. And and you could be doing that for like completely market reasons. Like everybody will have more faith in brokers if they know that we're all working together to come up with a set of standards. But a lot of the time it's also this way we, you know, avoid even more regulation from the government. All right. I th I want to make two more points about this, and then maybe we can take a quick break. is first, it strikes me that private ordering is not strictly black and white either or. That there's it sort of exists sort of along a continuum. That you can have some areas which are completely and very prescrip prescriptively set out. That you're you're there's almost no latitude and there's just no private ordering possible. It's just the law is very specific. And then at the other extreme you could have some areas that are just where the law is completely silent. There's just no you know, i everything is left up to private ordering there. So there's this sort of continuum of of possibilities in in between. So like an example of something that I think of that's very prescriptive these days is what goes on with universal proxy. The law and the regulation there is very specific and there's very little really private ordering, you know, bargaining and so forth among parties about how to how to run proxy contests there. with i within the law and regulation of pro of universal proxy. You know, how you display people, what yeah the the SCC was very specific there. And then at the other extreme, where everything is up to private ordering, I think a good example of that might be how I think it's written consent s solicitations work in at least Delaware corporations, that the law there is completely silent. about whether to require it or not. And if a company wants to allow written consent solicitations for you know it's shareholders act by written consent, it it can. It does not require to and I I think the law is actually pretty pretty you know, including cases. There's not a lot of cases about this. So that is an area that is completely up to the parties to decide. Yeah. Well, yeah, but I mean this is why I'm just I'm skeptical of the concept of complete private order because well, first of all, universal proxy, like the argument is, well, yes, once you're in a situation where there's a proxy system, universal proxy is now the SEC rule because proxy solicitations are heavily regulated. But Yeah. you right, exactly, right. you don't have t you can go public with non-voting shares and never ever have to deal with proxy statements. So so the point is that this Right, but but the point but but but this is my point that like you're right, I agree with you it's a continuum, but I mean in any given situation, especially in corporate and securities law, we would say, but at some point somebody opted made a choice as to whether they wanted to be part of this system or not. So you're only in the universal proxy system once you've set up a set a situation where you have w absolutely. But w once you have public voting shares, right? Yeah, okay, go ahead. shares with voting rights such that, you know, and you don't have to. and so that and the thing about written consents is you call that private in the sense that the company can do what they want, but I'm like it it's private instead of the company can choose whether or not to allow written consents or not. And usually they'll do that if they have a controlling shareholder and they know that exactly what the consents are look like. But to call that usually private ordering is viewed as a sort of Sure. Right. Right. Market contractual choice, and I question the, you know, the willfulness on the investor side. Yeah. we're we're getting you're getting my neck you're getting my next point in a second. But so like one of the outcomes here in the written consent area is that very few companies allow shareholders relatively few allow shareholders to act by written consent to through consent solicitations. It's it's it's They usually will do it only if they have a controlling shareholder so that they don't have to have a shareholder meeting just because the controlling shareholder wants to do something. Yeah. R i yes, exactly. And then the terms of written consent, you know, are then also left up to the company. But a again, everything sort of you know, what I'm thinking is that th there's a lot of the areas that we're gonna talk about, or we could talk about or we will talk about that kind of fall along this continuum. So it's it's degrees of private ordering, not whether or not something is completely privately ordered. Or or not. All right. But then you you raise this great point that I'm I'm really interested in in at least identifying here, which is how private ordering actually works is is sort of like there's a negotiation, there's a bargaining that goes on. yeah. Right. Yeah, I mean the usual reason, yeah, that you assume that like we make this the default, we should allow it, is the assumption that this is what parties arranged privately. But what happens when it's imposed by one and not really chosen by the other? Right. Right, exactly. So so the and and and and the imposer here is almost always gonna be the company, the board. Okay? And the shareholders are the ones who've kinda gotta accept and and I can think of you know, p part of the problem is that i i and so anyway, private ordering a a a s a good a a well a well ordered private or privately ordered resolution of some subject, I said basically assumes that the shareholders have at least some degree or s an appropriate degree of bargaining power and that they choose to exercise it. And those are those are big open questions. Yeah, I mean that's That well, that's that's why I mean, you know, as I said before, like the general assumption legally is we start with private ordering is good and you have to have reason to depart from it. but the reason it's good is because the expectation that the parties entered into an arrangement that they sort of decided was the best for themselves, and whether that is an accurate description of what happens when dispersed investors buy into a company is is sort of the opening question. Invest in a company. Right, exactly. So so a very well dispersed or I'd call well diversified whatever shareholder base, probably you know, the coordination problems there are are hard to try to, you know, bargain for like an improved written consent. I'm making that up as an example, or something else. go ahead. and then and then the other point I'm gonna make is that whether or not shareholders have Yeah. no, continue yeah, good. the power to bargain to resolve some corporate governance question using private ordering or th that way. also needs to consider whether shareholders in fact want to, which runs us right into the problem of rational apathy. That there may not be incentives Yeah. for a shareholders to get together. You know, th the an and you know, we've talked about this before about how this works. so so wha whether or not they in fact have the authority and power to bargain here, they may not it may not be in their interest economically to to spend the time on it. So Well right. So so right. So there are a couple of things. So this is the kind of thing where the dispersed investors who have find it difficult to coordinate and difficult to bargain because they are dispersed and they are, you know, and they all each have a small stake is exactly the kind of situation where you might say a more paternalistic regulatory environment is required to deal with this is a situation where one party can't quite bargain for itself. And the other thing that I'll say about what's Yeah. not private ordering, even about written consent situations is. The corporate form does not allow shareholders to do certain things no matter what they want to do. So for example, once you put in the charter, like you know, you're the founding company, you start a comp you you start the corporation, you put in the charter something about written consent. Written consent not allowed. Yes. Yeah, right. Sure. There is no way legally that shareholders can change that, because the law is that shareholders cannot initiate charter changes. That is a regulatory choice. so you could say, well, that's not, then it's not private ordering in the sense that shareholders have no ability to change it. But you could say, but then the other side would say, Well, shareholders can choose not to invest, can they really? And then the other side would say, Well, yes, but also. the charter change charter amendments, right. Right. Right. You don't have to it doesn't have to be a corporation. What if it's an LLC? Then you can come up with any arrangement you want as far as who can who can volunteer. So, so, you know, like at whether or not this is a privately ordered choice versus a regulatory choice by government, like shareholders cannot initiate charter changes, is very much a question of at like what point in time you look at the problem. sure. Right, right. Put it put in the operating agreement. Right. Yeah. All right. So I think we've s set some interesting and appropriate groundwork to discuss some of the practical implications about what this looks like, you know, and and look at I think there's a little bit of data available about how private ordering would actually look. and we can do that, but we'll do that after a quick break here at Shareholder Primacy. All right. Take a little sip of my water some more. In case you're wondering, the power is not back on here. It's okay. I'm sorry. Yeah, we lost power a couple nights ago. It was only for like an hour and a half, but it always freaks me out because I got stuff that like, my god, if it lasts much longer, I have to throw out the stuff. Yeah. Can we d yeah, no, yeah. We're we we went out for breakfast this morning because we there was no way there were we were the coffee maker was not working and that was a problem. Yeah. I have a teeny little electric generator that can't do very much. It can't power my house, but it can run my coffee maker, which is really critical. Yeah, well, no, it's it's portable. Like it's for camp, it's really designed for camping and it's electric. So you can store power in the battery and it holds it for quite some time. But it but it yeah, but it's like port, you can walk it's heavy, but you can walk around with it. So it it would not like Like on the outside? Like so it's so it's a battery powered generate. Okay, got it. power my refrigerator, but can absolutely power my coffee maker. Yes. No, no, no, no, no, no. It's it's it it it it it it it has solar power. So like if you were ever were completely without power, you could hook it up to solar panels and recharge it. But really it wouldn't do more than like handle your devices and your and my coffee maker. No. It has I have a solar power panel that attaches to the generator to that So it's a backup battery. you said generator, and I'm saying, god, and you better not be running a gas powered generator in your house. Do have solar panels on your house? This little generator. Think of what you would be designed for camping. That's what it is. So it's a whole little system? Yeah, right. Yeah, absolutely. That's great. No, yeah, we have no backup here. yeah. You know what I have? I have a backup battery for my sump pump. And that is and and and so it was like beeping 'cause the power's out. So it was telling you that it was fortunately it's a beautiful day here so it's not raining. But I always tell like to tell my kids I said so if it's like if there's a rainstorm going and you hear the sump pump switch on, I said to the kids, I said, That's the best sound home over. Okay. Yeah. Yeah. Yeah. I think I have one. I must have one. I don't know. I I know so little about my house. Yeah, yeah, I have some. But also we barely get rain here. We're in the middle of a drought, so it's not an issue. I would assume so. All right, some pump. Well there's groundwater that could anyway. All right, cool. now that we've had a little interlude here, Matt, we're back for you. How's that sound? All right. all right. Three, two, one, over to you, Ann. Welcome back to Shareholder Primacy. I'm Ann Lipton here with Mike Levin, and we're talking about private ordering and what would happen if companies and shareholders relied more on private ordering, and I'll add, if they were allowed to, because again, shareholders may not change the charter without director first proposing and so forth. But what would happen in a world where there was more flexibility about that? Right. Yeah. so I I I looked at this a long time ago when I started thinking about private ordering and then refreshed some of the there's there's there's if you want to look at it the right way, there's actually some data that would be possible here and I and I was wondering, okay, let's look at like all the precatory proposals and governance and sort of use that as as a bit of a signpost about how private ordering might actually kinda look. And I'm I'm coming to the conclusion that, you know, as much as I would expect, companies would love to see forms of private ordering. They'd like to get out of the, you know, required to carry precatory proposals. There's probably some companies that would love to do semi-annual reporting, to use the two examples we kind of started with. there's a bunch of of areas where if they were to let shareholders kind of decide or were to bargain with shareholders about how this works, they may not get to a a a place where they'd really want to be. So if you just look at how shareholders sort of express preferences on again governance proposals. This is in the last couple of years. And there's and and now we're starting to see, you know, reports and analyses of kind of what the twenty twenty six proxy season has brought us. there were a lot more s some somewhat more pregatory proposals on governance. than there were in twenty twenty five, which is a stark contrast to ENS proposals where there's like it's down by like half this year, at least according to some of the early early reports. and the average support for these proposals is goes runs from decent to really, really good. So like there were a few dozen proposals to separate board chair and CEO, which again is that's a huge problem for a lot of boards. They want the flexibility. And if if we were to bargain on that, what'd that look like? Well they the average support for these is like twenty five percent. Which doesn't sound like a lot, but but that's that's a lot in this yeah, exactly. and then there's you know this runs all the way to proposals to basically get rid of supermajority voting. It's a lot. Yeah. It I mean it's a significant standards for also for you know anything shareholders vote on, you know, there's it runs up to like as much as eighty percent our of shares are needed to approve certain kind of charter amendments and so forth. and so there's and this is a big John Chavadin proposal. He's submitted s you know many dozens of these to basically just say let's get only the majority voting. Right. in majority voting standards and the average level of support for these is like sixty percent. So if if the company were to say, okay, we're just gonna do what shareholders kind of want here, which again is not strictly what we mean, but th th there'd be a significant sentiment to change around a lot of the corporate governors arrangements that that companies have gotten used to. And this and we talked about majority vote CN we talked about separating board chair and CEO, but there's others. There's, you know, support for declassifying boards, support for we talked about written consent to start allowing that and to allow special meetings. There's certain takeover defenses. So there's there's a whole lot of areas where shareholders are becoming, you know, they're pretty aware, at least the institutions are. And I think and they're and they're willing to at least in this context, express a preference for stronger Protections f for themselves. Well stronger po we stronger shareholder power. Yeah. Yes, exactly. And and if that if we if we kind of use that as as I said, a signpost to trying to understand what might happen if we were to privately order corporate governance arrangements, I'm not sure companies would be all that interested th interested in trying to pursue that. I mean Well, I mean the you see, but the thing is that they'd say that they I mean it's just so complicated. They would say that they are privately ordered. You didn't have to invest in us. You invested in a corporation, you understood that this was the legal setup when you chose to invest. and that and maybe Right. Right. That meant that you paid a little bit less for the shares, but that's okay. You priced it and therefore it was privately ordered. but I would say this doesn't look anything. I would say, first of all, nobody knows how to price the fact that there's a controlling shareholder who I mean, these they're these are very it's very hard to price because you have to predict what effects they have on future board behavior. and so that's the first problem with calling that. huh. Yeah. the governance, right, yeah. G governance mechanisms are notoriously hard to evaluate, yeah. Right. and private. The the other reason to it it I'm not convinced that you know a choice of buying into something at a price counts as privately ordering the arrangement. and the other aspect though which we haven't talked about is the investors as you said they're institutional and institutional investors are not people they're created by law they're subject to legal Yeah, that's fine. Yeah. sure. Right. You get right. Restrictions on what they can do. The Trump administration right now is being very you know, sort of proposing and threatening all kinds of limits on ability to take ESG, and that includes governance into account when institutional investors vote their shares. So calling any Yeah, so it's turtles all the way down. Like there's no point at which this is just a pure private bargaining space. Sure. In making su in making investments, yeah. Right. So y y yes, that's I and I and I'm I'm I'm I'm glad we brought that up here because you're you're right that there's there's gonna be some enforcement mechanism essentially that has to enter into this at s at some point. you know, whether it's the SEC or Delhi Chancellor Court or Delary Chancery Court or something like that. But you're right, it's y you c you can't escape it. You know, government presence h here at various points. So so so that's kind of the This the the s go ahead. You're gonna say Yeah. Yeah, no, but no, but as you say, you're right. Like, but at the end of the day, what the shareholders, at least what they seem to be voting for, what they request, is much more governance power than a lot of companies provide. But at the same time, you know, like st even though BlackRock, Vanguard, all of them will put out statements that say they're not crazy about dual class, they want shareholders to have more rights. Yes, correct. That does not stop them from putting, you know, billions of dollars into controlled companies, which so they're yes. from Spring. Yeah, but then there there's other there's other reasons unfortunately. You know, it'd be BlackRock's, you know, they they put it in order for five billion dollars worth of SpaceX and and you know and it wasn't because they were and they overlooked the governance flaws, but you know, it for them the pressure to include that in portfolios overcame that and they may regret it. I don't know. SpaceX I don't know if you saw it as we're recording this today on a Tuesday. SpaceX is now trading below its IPO launch price. Yeah. Well, it would be yeah, below the opening price it is. you know, how long that'll last? I mean, it's such a tiny float, it's gonna be extremely volatile for quite some time, I'm sure. Right. Right. damn, we talked about SpaceX. We weren't gonna do that. All right. Anyway, let's apply what we've talked about to a couple of other, you know, kind of current controversies, then we can wrap this up a little bit. So we've talked a little bit in the context of financial reporting. I it seems to me that they're i i i it that we're right. That finan that whether someone reports quarterly or annually or f semi annually or monthly or whatever frequency is it does illustrate what's possible with private ordering. And part of the problem is that we get to the problem with bargaining power. Is that, you know, th this this may be an area that shareholders you know, really really would want something, you know, to a company to stay with quarterly reporting rather than move to semi annual. But I'm I'm not sure how they would whether they'd successfully express that. If a company really wanted to, you know, go to semi annual and I don't want I mean, for the record, I'm I'm a fan of qu I'm a fan of, you know, more data the better. So I you know, I like weekly I want continuous reporting. But nie I I i it's it seems to me that that letting companies and shareholders kinda privately order financial reporting might be a mistake. Right. Well, I mean, this is this has been a debate in the securities laws since we've had mandatory reporting. I mean, notice that the choices here are semi-annual and quarterly. That's not like exactly a private space. Like you're still required, but there's been a debate since nineteen thirty-three and nineteen thirty-four as to why we require reporting at all. And it a lot of it has to as opposed to just let Yeah. Right. If you don't like it, don't invest. And and and a lot of the arguments have to do with the fact that investors are dispersed. If you don't have a mandatory system, then investors have to waste a lot of like it's a inefficient because each investor is trying to dig out their own information. They're duplicate they're they're doing duplicative efforts. and and so it's it it creates a better, smoother system if we just have standardized reporting and another Right, yeah, yeah, yeah. And this is a coordination issue with the government that if it requires standardized reporting, then that means everybody knows all the reports are comparable. Everybody's getting the same information about company after company after company, which makes it easy for an investor to compare across companies, makes it easier to value companies because you have more data that you can use that is all in the same format, disclosing the same kinds of things. And that's very difficult. And and and yeah, and that's very difficult to do on a one-on-one company by company negotiation. Right. Right, we have more information about what's what's going on in the economy, basically. yeah. Right. So f so setting aside whether or not that negotiation would succeed or fail because of the lack of bargaining power, there's just benefits to having so may maybe the yeah, that's the ex the externality, of course. Okay. And that's the externality. That's the issue. There are positive externalities to having regular reporting that go beyond what any one investor puts into any one company. That it gives you a picture of the environment of the economic environment. It creates data that is used for the capital asset pricing model so that you can value other companies and so forth. that That was very what very well put. All right. Let's bring up one other example that we haven't quite talked about, which would have to do with litigation and like forum selection and whether people can sue or whether they have to arbitrate. i it seems to me that this too is is possibly not something that we should leave to private ordering. But I I don't know. I thought I'd bring it up and sort of see how you react. Well, I don't think that it should be left to private ordering. Absolutely not. Okay, right. Okay. But the reasoning would be going back to externalities and and and probably more information asymmetry here too. Yeah. It it would be b it's both. So it's a degree of information asympto im asymmetry. I think that that well part of the issue here is that even those who want near complete private ordering with mandatory reporting would want very strong fraud enforcement possibilities because that's like the bare like because the theory is something like companies will know that Yeah. okay. Investors won't invest unless they disclose sufficient information. Now that is always a prop like that theory also ignores that management themselves get a lot of private benefits by not disclosing information. So they won't ever fully volunteer, no matter how much investors want it, all information, no matter how much investors want it, because they can insider trade if they don't disclose information, you know, all kinds of things like that. But Okay. sure. Yeah. Right. But even the most extreme private ordering fans usually want very strong protections fraud enforcement, because if you're not requiring companies to disclose information, then the only way this works is if investors can sort of say, Well, I'm not investing unless you give me information, and then you have to be sure that that information is truthful. So if companies can sort of undermine the fraud enforcement, then you know the system can't work properly. So so so so so so this guys sort of the point we made earlier about how you can privately order as much as you want all in all many, many areas, but there has to be some sort of an enforcement mechanism. And by talking about my bringing up litigation as an example, pr privately ordering that enforcement mechanism is probably a really bad idea. Yeah. Yeah. Well, I think I think it is. I mean, and and then we can also talk about, you know, like aside from the fact that it on that without the enforcement mechanism, the private ordering it itself falls apart. There's also once again we can talk about externality like the whole per the whole purpose of the markets isn't there so that individual investors can make money. It's there so that we allocate capital appropriately throughout the economy. So and so that we get the iPhone because people are because investors are putting their money in the right place. So those are the kinds of externalities that we're trying to protect when we mandate reporting, when we mandate, when we have penalties for fraud. It's not just so that investors won't lose money, it's so that capital will flow to where it can be most valuable societally speaking. Right. Right. Yeah. Huh. All right, so I think I know the answer to this question, but it sounds like y I was gonna ask, what do you think of private ordering? But I think I I think I kinda know. It's that it's it's it needs to be limited in your view, in some in in in a lot of places. yeah, I I just it it's not j it's just that I I I I question the premise since we're talking about institutional investors that are themselves constructions of law. there is that corporate form, which is itself a construction of law, th that you can't have a contract that isn't gonna get enforced at some point. And the bare minimum for any contract that you can never opt out is the duty of good faith and fair dealing, which gets interpreted by a court. Like I'm really always questioning that like I I think that Yeah. The concept of private ordering just sort of obscures how much, one way or another, there is public power standing behind all of this. okay, interesting. Okay. So you could privately order as much as you want, but until you know, w once it goes once it goes once it goes the wrong way for you, you're gonna wish it didn't. You're papering over. Yeah, well, you're papering over all the places that the government and public power is sort of pervasive. All right. And I now I I think my thinking has evolved even in these last thirty, forty minutes. again, the the go ahead. But no, but on the narrow issue, certainly investors, you know, if you treat them, you know, have expressed much more preferences for more power within the corporate form. And the question is, why isn't that being delivered? Right. Well there's there's broader institutional questions that go way beyond private ordering about why why that's the case. So this is interesting. Well, I but it it but I think it r you raised the right question. Like what like if we know, like based on w that that investors continually say, I want more voting rights, I want more power, I I don't want a super majority voting standard, I want to be able to act this, you know, this way, I want votes on poison pills if they last more than a year, whatever it is, like if we if if investors consistently want that, why isn't that being delivered by the market? They're not getting it. In fact, companies are more and more going public with dual class share structures. Okay. Yeah, right, yeah, yeah. And that's sort of the puzzle. Is it because investors revealed preferences? Is in fact they don't really want those things very much, or is there some other problem? Right. And and the problem could get to in my estimation, the the the problem with shareholder bargaining is that they're they're either don't have the power to which is again, that's a different premise that goes underlies private ordering, but y yeah, they don't have the power, they choose not to exercise it. Yeah. Well, that's exactly Well, if they don't have the power, that is exactly the situation where paternalism should step in. It wait we can't trust what the market is producing. Yeah. Exactly. Right. Right. And I'm j I'm always curious about the rational apathy angle. About w whether they're fully informed and they just it's just not worth their time to to privately order, to bargain to privately order some, you know, narrower aspect of their investment that has to do with a, you know, element of corporate governance. So I don't know. All right. This is this is kind of fun. Yes. Okay. And it's everywhere. Again, everything is private ordering. So I'll have to have to keep looking for examples, all right? All right, let's wrap up. How's that? This is Shareholder Primacy, hosted by Ann Lipton and me, Mike Levin. I'm an independent activist investor and advisor to investors about their activist situation. Anne is, as always, professor of law and the Lawrence W. Demuth, Chair of Business Law at the University of Colorado Law School. You can find me, Mike, at the activistsinvestor.com, and you can find Anne at Law.colorado.edu. Our podcast is produced and distributed by FreeFloat Media. Thanks for listening. We'll talk again. Again soon. Alrighty. And you're off to a retreat you're off to a retreat, I think, for the rest of the week or something. Is that what that is? Okay. No, I okay, so I'm having surgery later this week. which is why it it's no, it's very, very minor. And unless something goes really catastrophically wrong, I should survive the experience. And let's just say the nature of the surgery is not one that I am going to share. But Yeah. Okay. I I don't know exactly how long it's gonna knock me out. Like it should be, it's very minor. It's in I'm not even spending the night in the hospital. But yeah, it's at like I get full anesthesia, but I should be going home the same day. But I like I have no idea, literally none, whether I'll be pretty much fine in a couple days or whether I'll be just like a zombie. So it's straight outpatient. Okay. Okay. Do you have someone there who's able to kinda help you care for yourself? no. Sadly, no. But I I have a cousin will be picking me up because they won't discharge me otherwise. But mostly, you know, like yeah, they won't discharge me unless my cousin picks me up. But otherwise I pretty much just, you know, have to hope that things are not so bad that I have to Uber my way to urgent care afterwards. But it's really minor stuff. It like this is this is as I said, it I'm not even spending the night. yeah. this is n this is nothing serious. Just it's it's really nothing serious. that's what that's what I was asking. Is that is the okay. no and And you're fe and and you're feeling okay? Okay, great. I just wanna I just I wanna make sure you're Like the I mean I'm scared only in the sense of look they're gonna put me out completely on the operating table who knows what could go wrong but you know it's it's really not serious I'm 99% probably will Thursday Yeah Okay. Well you're you're you're my podcast buddy and my my my my buddy buddy and I wanna make sure you're in good shape. So Okay, and when is this scheduled for? Thursday. if you're in any condition to kind of give an update, I would be grateful. I will give an update. I should be. Like, I mean something really has to go catastrophically wrong that I wouldn't be, but okay. I I will. But you'll you'll see me online if I'm functioning, so. is this still recording? This is still did you stop the recording? Yeah, no Mac can hear the But like Thursday night or Friday if you're feeling up to it and you just wanna shoot me a text and say th I survived. All right, cool. All right. be well. Take care of yourself. Hope it goes well. no, I didn't. This is all for Matt to hear now. Sorry.