Editor’s Message
Happy fall! It still feels like summer outside, so I haven’t embraced fall quite yet. The equity capital markets during the third quarter of 2024 were a bit slower in July and August, but picked up in September. We are starting to see a stronger pipeline of securities offerings that will hopefully be a sign of a busier 4th quarter and 1st quarter of 2025. The recent interest rate cut combined with the completion of the US presidential election has the potential to lead to greater capital market activity heading into the new year.
There wasn’t a tremendous amount of SEC rulemaking during the 3rd quarter, but Nasdaq proposed changes to its listing standards that, if approved, will make it more difficult for micro-cap companies to remain listed on Nasdaq. We have summarized those proposed rule changes in this newsletter and anticipate SEC action on the proposed rules on October 7th. We will keep impacted clients apprised of the SEC’s action.
As we prepare for the upcoming proxy season, there are a couple of governance items that calendar year end companies may want to start addressing now. The first is that public companies will need to begin publicly filing their insider trading policies with their next annual report. If your insider trading policy hasn’t been reviewed in the last several years and isn’t ready for “prime time,” now would be the time to update. Also, next year certain public companies will be required to disclose their stock option grant policies and price of the company’s common stock prior to and after stock option grants in their proxy statement. If your company grants stock options and you haven’t adopted a formal stock option grant policy, now would be a good time to adopt one.
We will be leading a panel discussion and sponsoring the LD Micro Main Event XVII Conference in Los Angeles on October 28-30. We will also be sponsoring the Benchmark Discovery Conference on December 11 in New York City. We look forward to seeing anyone who will be attending either of those conferences.
Best wishes on a productive fall and a strong finish to 2024!
Alex McClean
Practice Group Leader
Securities and Capital Markets Group
Upcoming Events
Our Securities & Capital Markets team actively seeks opportunities to connect with clients, friends, and peers at events. Below is a glimpse of our upcoming engagements and the team members who will be in attendance at each. If your plans align with ours, please contact us and we’ll set up a time to connect at the event.
October 28 | LD Micro Main Event XVII | Contact Alex McClean and Chris Murillo
The LD Micro Main Event exemplifies legitimacy in the micro-cap space. Alex and Chris will be joined by other panelists to discuss the pros and cons of micro-cap capital raising strategies including overnight deals (CMPOs and registered directs), ATMs, PIPEs, Form S-1 registered offerings, warrant solicitations, and convertible note offerings.
November 4 | Spartan Capital Investor Conference | Contact Chris Murillo
The Spartan Capital Investor Conference is a premier event that brings together public company executive teams, institutional investors, thought leaders in the U.S. capital markets, and representatives from Spartan Capital. This conference offers a unique opportunity for networking, knowledge sharing, and strategic discussion.
November 6 | Greater Rochester Chamber Top 100 Awards | Contact Alex McClean and Chris Murillo
Greater Rochester Chamber of Commerce proudly presents the annual Greater Rochester Chamber Top 100 Awards—a program designed to acknowledge and celebrate the fastest-growing privately owned companies in our thriving region.
Benchmark Discovery Conference | December 11 | Contact Alex McClean and Chris Murillo
Benchmark’s Discovery Conference features one-on-one in-person meetings with dynamic publicly traded micro- and small-cap companies in an intimate conference setting.
Don’t Forget! Shortened Deadlines for Schedules 13D and 13G in Effect Now
Are you ready for the shortened deadlines to file Schedules 13D and 13G? As of September 30, 2024, Schedule 13D initial filings are due within five (instead of 10) calendar days of the triggering event, and any amendments are due within due two business days (instead of “promptly”).
The timing for Schedule 13G initial filings and amendments depend on the type of investor (passive, exempt, or qualified institution). Generally, instead of filing within 45 calendar days of year-end, initial filings and amendments must be filed within 45 calendar days of quarter-end. However, shorter deadlines may apply!
Check out our article on these changes for more details.
Legal Insights
We regularly provide insight on a range of important securities and regulatory developments through our LEGALcurrents and webinar series. Below are links to some of our recent articles and other content that may be of interest:
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- We are keeping a close eye on SEC action on the Nasdaq rules proposed this summer. The SEC has announced that it will approve or disapprove, or institute proceeds to determine whether to approve or disapprove, these proposed rules on October 7.
- Dueling Exchange Rule Proposals Target De-SPAC Timelines
- Navigating AI Risks: Key SEC Enforcement Trends
- The Jarkesy Decision and SEC Enforcement Proceedings
HSE View: Warrant Inducement Offerings
HSE View: Warrant Inducement OfferingsHSE attorney Scott Mosley breaks down the “synthetic ATM” or warrant inducement offering, in this spotlight on a trending capital raising strategy.
HSE Making News
Alexander R. McClean and C. Christopher Murillo were included in The Best Lawyers in America® list for 2025
Best Lawyers is based on an exhaustive peer-review survey. For the 2025 list, more than 23 million votes were analyzed, which resulted in more than 80,000 leading lawyers being honored in the 31st edition.
Margaret K. Rhoda was included in the Best Lawyers: Ones to Watch® in America list for 2025 and the WNY Daily Record Up and Coming Lawyers list
Best Lawyers: Ones to Watch in America selection recognizes lawyers who have been in private practice for less than 10 years in the United States and is based entirely on peer review.
Upstate New York Super Lawyers and Rising Stars
Nineteen of the firm’s attorneys have been selected for inclusion in the 2024 Upstate New York Super Lawyers list and another 16 attorneys, including Margaret Rhoda, have been recognized on the 2024 Upstate New York Rising Stars list.
WNY Daily Record Attorneys of the Year
Margaret Rhoda was recognized as an Up and Coming Lawyer in the Daily Record and Rochester Business Journal’s 2024 Attorneys of the Year. “The 2024 Attorneys of the Year are professionally successful but also make time to be actively involved in the community. Their exceptional accomplishments help to make the Western New York community a great place to live and to work.” said Suzanne Fischer-Huettner, managing director of BridgeTower Media/The Daily Record and Rochester Business Journal.
Welcome to the Firm
HSE Welcomes New Business Development Manager
Julie Bellanca has joined the firm as a Business Development Manager in the firm’s Buffalo office. In her role, Bellanca is responsible for creating and implementing marketing and business development plans and programs that will help expand existing client relationships, attract new clients, build the firm’s profile and strengthen its reputation in Buffalo.
Past Events
Partner and practice group leader Alex McClean hosted the annual summer gathering for our team and families, and Christopher Potash provided craft cocktails and mocktails for the occasion. We’re lucky to have someone that can create a bespoke executive compensation strategy and a bespoke cocktail menu!
Members of the Securities and Capital Markets team were excited to participate with HSE colleagues at this year’s Pride Parade in Rochester. HSE was one of more than 200 groups participating in the parade, which is part of an annual tradition in Rochester with its roots dating back to the early 1970s.
Attorney Spotlight: C. Christopher Murillo
Chris Murillo is a partner in the Securities and Capital Markets group. Part of Chris’s practice focuses on the formation and listing of special purpose acquisition companies (SPACs) and the execution of merger and acquisition transactions creating new, publicly listed operating companies (de-SPAC transactions). Maggie Rhoda sat down with Chris this summer to learn more about his practice.
Maggie Rhoda: What’s a common misconception about SPACs that you find yourself explaining to clients or those unfamiliar with your practice?
Chris Murillo: SPACs are set up with the proceeds of their IPO being placed in a trust account that is distributed at the time of the business combination. It is tempting to see that pile of cash as being available to the post-business combination company, but the reality is that the majority of that cash gets redeemed out by shareholders at the time of the business combination. If you don’t need that liquidity, great. However, if you will need liquidity in connection with the de-SPAC transaction you should be prepared to engage in a form of roadshow to raise money through a PIPE or similar transaction. That adds complexity and time to the de-SPAC process which prospective companies need to be aware of and plan for.
MR: Do you have any unsolicited advice for business owners considering going public through a de-SPAC?
CM: Prepare as if you were doing an IPO. While a de-SPAC transaction can get you listed in a relatively quick timeframe, that is no substitute for making sure you are “public company ready.” Indeed, if you are considering going public through a de-SPAC transaction it is incumbent on you to ensure you are ready to be public because these transactions can move quickly. There are many de-SPAC companies that have found themselves unprepared to operate under the regulations and scrutiny that public companies are subject to. Have a finance team in place in advance; assume the audit is going to take longer than you expect; make sure you have an internal team that has some familiarity with the strictures of public company compliance; and, of course, ensure that you have an external team of professionals who can help you navigate life as a public company.
MR: Where do you see the future of SPACs? How does that compare to the frothy days of 2021?
CM: While gratifying that the market became obsessed with a strategy I had been familiar with since early in my career, the explosion of SPAC offerings during the pandemic are likely a high water mark for the vehicle. In other words, the SPAC bubble has burst. Now we are seeing a steady state for SPACs similar to the pre-pandemic market. Because there are fewer SPACs chasing the same number of target companies, there are likely to be better deals for investors and less speculation.
I believe there is a place for SPACs as a useful product within the operations of healthy capital markets because having multiple paths to public company status is generally good, and because SPACs specifically can benefit target companies by allowing a company to “bolt on” an experienced sponsor team and an already build-out network of professionals and service providers. It also allows average investors to participate in a going public transaction directly, rather than having to wait for the key institutional accounts to which underwriters allocate IPO securities to sell out of their positions post-IPO.
MR: Rumor has it that you took a break from practicing law to open and operate your own distillery. How has that experience informed how you practice now?
CM: After law school I worked at major law firms in New York City for about 9 years; I worked long nights and weekends and frankly was burnt out. At the same time both my grandfathers were engineers and I’m a maker at heart, so I longed to work with my hands; to create something tangible beyond a prospectus. I was really into the New York cocktail scene so I got it into my head that it would be fun to start a distillery. So I did. I spent a little over 5 years working in the spirits industry, and had my own facility before taking over the production at the largest distillery in NYC at the time.
Owning my own business and running operations for a sizeable craft distillery was challenging, fun, and gave me a unique perspective on advising clients. During this time I hired lawyers, I signed the front of the checks, and I remember very well what it was like having a legal issue that I needed help with. I remember thinking about how many cases of gin I needed to sell in order to cover one hour of lawyer time, and to this day that informs my approach to helping our clients address legal issues in a value-added way. I often get asked if I miss being a distiller, and the answer is that I love my job and the HSE team, but yes, I miss it, especially driving the forklift.
MR: When you’re not in the office, how do you enjoy spending your time?
CM: Board games! If you think about it, it isn’t a surprise that a securities lawyer likes board games; there’s a set of rules and a set of objectives and you need to navigate the rules to get the best results in the face of chance and competitors. A good board game requires developing a strategy, executing that strategy and being nimble when you need to pivot because of an unforeseen challenge. I also like that you can always learn something new by either learning a new game, or by unlocking a deeper understanding of a game you’ve played a dozen times before. And, of course, I love the social aspect of board games. I’ve made great friends playing board games and I’ve been able to connect with my kids by playing the games they love together.
Thanks, Chris. Looking forward to celebrating your 5-year anniversary at HSE this winter!
About HSE’s Securities and Capital Markets Team
Leveraging top talent and a team-oriented approach, we provide responsive, cost-effective, and practical counsel to public companies and organizations of all sizes looking to access the capital markets.