Academic

Hedge funds and other investors have been acquiring large stakes in a very small number of companies within the ten day window before they have to report the stake to the SEC. Wachtell wants the SEC to change that to a one day reporting requirement and then a two day standstill in the acquisition of further shares.  The SEC sounds like it is inclined to address the problem.  

And Steve Davidoff, in a very nice piece, explains some of the political economy here:

Corporate America is divided over the Wachtell petition. According to people close to the firm, an earlier draft of the petition was circulated among seven law firms, a working group of well-known corporate law firms commenting on Dodd-Frank initiatives. But the other law firms begged off signing the petition.

The firms might have simply disagreed with Wachtell. But there are other explanations. First, the other firms have large capital markets practices, and their investment bank and hedge fund clients would be unhappy with the proposed changes.

Second, Wachtell portrays itself as a firm that favors management. It actively represents companies against hostile takeovers and activist shareholders but appears to have only one large hedge fund activist client, Eddie Lampert?s ESL Investments, which controls Sears. 

I'm no fan of activist hedge funds who drape themselves in the regalia of free markets while talking their book.  And I even maybe - maybe - can at least consider the problems for management of short-term investor horizons and the uncertainty created by secret takeovers.  

But this looks like the strangest form of anti-investor regulation.  Why on earth should there be a two day stand-still?  It's bad enough that companies can resist the market for corporate control by creating anti-takeover defenses.  But their investors can sell.  This would be a market wide rule - the only way to sell is to leave and go to Europe.  And the run up in shares when companies like JC Penny are subject to hedge fund acquisition strategies must be pretty sweet for shareholders.  How are they possibly helped by making those sorts of acquisitions more difficult?  This seems like an anti-investor rule, and the SEC is supposed to protect those people, not corporate boards against them.  Moreover, I'd want to see lots more examples of "problematic" corporate acquisitions begun during the ten-day quiet period before I'd rush to act; Davidoff notes that the Wachtell memo lists only four examples of this sort of thing - and two occurred in other jurisdictions.

I accordingly think the rule sounds like a very bad idea.  And I wonder what Professor Bainbridge, the corporate-law-should-protect-boards theorist, thinks about it.