Nov 19, 2025

Subject: Money Stuff: The SEC Opposes Shareholder Proposals

Summary:

This detailed analysis discusses the evolving landscape of Rule 14a-8 shareholder proposals, the SEC’s recent procedural shifts, government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac’s capital structure challenges, and some observations about market behavior and cultural influences on finance.

Key Points:

1. Rule 14a-8 Shareholder Proposals:
2. Shareholders of US public companies can submit non-binding proposals for inclusion in annual meeting proxy statements.
3. These proposals often focus on environmental, social, or governance issues (ESG), such as fossil fuel use reports or board diversity.
4. Companies traditionally try to exclude proposals they find unfavorable by requesting “no-action” letters from the SEC, arguing violations of Rule 14a-8.
5. The SEC historically reviews these requests and issues no-action letters allowing exclusions if the proposal violates rules.
6. However, the current SEC administration has shifted policy, choosing not to respond to no-action requests, effectively permitting companies to exclude shareholder proposals without SEC staff objections.

7. This may discourage small or less popular proponents but could invite litigation or proxy fights by well-resourced activists.

8. Implications of Shareholder Proposals:

9. While generally non-binding and symbolic, presence and voting support of these proposals signal investor interests and board-shareholder dynamics.
10. Majority support for proposals opposing management indicates shareholder dissatisfaction and possibly triggers activist hedge fund actions, proxy fights, or changes in corporate governance.

11. ExxonMobil’s unusual legal challenge to exclude environmental shareholder proposals highlights tensions when companies contest SEC authority on these matters.

12. Fannie Mae and Freddie Mac (GSEs) Status:

13. Both remain under government conservatorship since the 2008 financial crisis.
14. The U.S. Treasury owns approximately 79.9% of their common stock via warrants and holds senior preferred stock (SPS) with ever-increasing liquidation preferences, amounting today to roughly $367 billion owed.
15. The existing SPS structure funnels all profits to the Treasury, effectively rendering publicly traded common stock worth near zero in theory, yet stocks trade above zero reflecting market skepticism.
16. Discussions continue on how to:

    • End conservatorship,
    • Normalize capital structures by addressing SPS liabilities,
    • Conduct public offerings to recapitalize and transition GSEs to private ownership.

17. Bill Ackman advocates for the Treasury to write off the $367 billion SPS liability now as a step toward restoring shareholder value and exiting conservatorship, which would reduce uncertainty and risk for investors.

18. Market Behavioral Insights:

19. Some investors and market participants act based on “k-level reasoning,” where they try to predict others’ less rational behavior rather than pure fundamental valuation.

20. Meme finance concepts like choosing “meme numbers” (e.g., 69, 420) for stock purchase quantities have cultural and psychological influence on retail investors, potentially affecting stock price movements.

21. Miscellaneous:

22. There are parallels drawn between trading physical luxury goods (like Hermès Birkin bags) and abstract trading of receipts or NFTs, highlighting challenges with authenticity and valuation.
23. Recent news includes widespread Cloudflare outages affecting major platforms, big tech investments in AI companies, and interesting moves in hedge funds and IPOs.

Conclusion:

The SEC’s recent stance effectively reduces its role in policing shareholder proposal exclusions, potentially altering corporate governance dynamics by empowering companies to exclude proposals more readily. The complicated status of GSEs continues to draw attention, with calls for structural reforms to pave the way for their return to normal corporate form and public markets. Cultural phenomena such as meme investing and behavioral models like k-level reasoning influence modern financial markets, underscoring the complexity beyond traditional valuation.

For detailed legal and investment implications, and ongoing updates on these topics, subscribing to specialized financial newsletters like Bloomberg’s Money Stuff is recommended.

Stay Well!