The Fennel Newsletter
At Fennel, we work every day to give individual investors the tools to invest like the pros. And recently, we just launched a new tool to add to your investor toolbelt — custom order routing.
What does that mean? Order routing is what happens after you tell your broker to buy or sell a stock. Some of the other investing apps out there will take client orders, and pass them along to the trading venue offering them the biggest kickback (*cough* payment for order flow *cough*).
But at Fennel, we want to do what’s in the best interest of the investor. That means sending orders to over 40 different trading venues, so there’s a greater chance of getting investors the best prices.
What our custom order routing feature does is give investors more say in where their order goes (to exchanges, market makers, etc.). That way, they can choose to maximize the number of available venues, or opt out of sending their orders to certain places.
More chances to save money AND more control when investing? That’s the Fennel way.
What We’re Talking About
Utah sues TikTok, alleging it lures children into addictive and destructive social media habits (AP News)
What happened: Utah Governor Spencer Cox and Attorney General Sean Reyes announced that the state of Utah is suing TikTok, alleging that the social media app is harming children by baiting them into addictive and unhealthy social media habits.
Utah joins Arkansas and Indiana, which have also sued TikTok for similar reasons, and it comes as the Supreme Court prepares to decide on the constitutionality of government attempts to regulate social media.
“We will not stand by while these companies fail to take adequate, meaningful action to protect our children. We will prevail in holding social media companies accountable by any means necessary,” Gov. Cox said at a news conference.
“TikTok designed and employs algorithm features that spoon-feed kids endless, highly curated content from which our children struggle to disengage. TikTok designed these features to mimic a cruel slot machine that hooks kids’ attention and does not let them go,” AG Reyes added.
Why we care: First, let’s address the elephant in the room. TikTok has faced a lot of heat from government officials because it’s owned by Chinese tech company ByteDance, which is known to share user data with the Chinese government. This has caused multiple countries and government agencies to ban TikTok.
So whether Utah’s lawsuit is really intended to #SaveTheChildren or push back against Chinese surveillance is up to you to decide.
But if the lawsuit is intended to protect vulnerable minds “by any means necessary,” investors may want to pay attention to whether this lawsuit builds momentum. It could have a broader chilling effect on the tech sector.
That’s because employing “algorithm features that spoon-feed kids endless, highly curated content from which our children struggle to disengage” sounds a lot like what American social media companies also do. Don’t Facebook, YouTube, and other social media sites employ similar algorithms that promote endless consumption?
Studies do show that social media can be detrimental for the mental health of children — young adults who use social media are 3x more likely to develop depression. So the case for government intervention is definitely there.
Government regulation is always playing catch-up with tech. Just look at the legal battles surrounding the classification of gig workers, the rocky rollout of Uber across the world, or most recently NYC’s effective ban on Airbnb.
But now social media sites (both TikTok and others) could be next to face the wrath of regulators.
Shareholder Votes
Should P&G ensure it won’t change its bylaws to harm shareholder rights? (Oct 10) — When you think of how a company elects its board of directors, you probably think of a political election, right? Board directors get nominated, and then the nominees with the most votes win a seat.
Well, there are definitely similarities between board elections and political elections, but there are differences too. And one of the big differences in corporate elections are bylaws.
Corporate bylaws are the rules that determine how the company is organized and managed, and some of these rules affect corporate elections. There are some legal requirements, but generally, companies write their own bylaws that govern their governance.
On the surface, this makes sense: companies usually write the rules that apply within company walls. But when it comes to board elections, this means that the company gets to write the rules for what constitutes a “fair” election.
This can make it an uphill battle for activist shareholders who want to secure seats on a company’s board, because the board nominees by the company can have an unfair advantage over activist nominees — due to the bylaws that determine what hoops nominees have to jump through to get elected. And on top of that, the company can make amendments to these bylaws that (theoretically) favor them over activist nominees.
Bloomberg’s Matt Levine does an excellent job explaining how bylaws can affect activist board elections here.
So what this specific P&G shareholder proposal does is requests that the company seeks shareholder approval before it changes any bylaws that could affect corporate elections.
Specifically, it asks the company to seek shareholder approval before it:
(1) requires investment funds to disclose the identities of stockholders, members, limited partners, or holders of similar economic interests that own less than 5% of available shares
(2) requires nominating stockholders to disclose plans to nominate candidates to the board of directors of other public companies
(3) requires nominating stockholders to disclose prior stockholder proposals or director nominations that such a stockholder privately submitted to other companies.
Depending on who you ask, these sort of requirements could be interpreted as a way to stamp out activist board nominations.
The proposal filers, James McRitchie and Myra K. Young, have filed similar proposals at a handful of other public companies. But what makes this particularly interesting for P&G is that a handful of descendants of the original Procter and Gamble founders have come together to publicly oppose the election of several board members. These heirs to the P&G throne have stated that the company currently doesn’t do enough to protect the environment, which goes against what the company originally stood for.
It’s kinda like the plot of Succession, if the Roy children cared about the environment instead of money and status.
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