A (2:33)

Why that? Yeah, why that? Okay. NoBo stands for non objecting beneficial owner. So let's take that apart. A beneficial owner is one who owns their shares through a custodian, through a broker. So you might own your shares at Schwab or Fidelity or, or an institution might own them through a prime broker like Morgan Stanley or something. Okay? So basically you don't own the shares in what's known as record name, but you own them through this custodian and you are the beneficiary, you benefit from their owning it. All right, it's economically, it's all the same thing. It's just legally, it's a distinction. So a beneficial owner is that if you and the custodian knows who you are, but the company that you own the shares in does not.

B (3:28)

Got it?

A (3:29)

So when you register for an account in all the paperwork, one of the questions that that custodian or that broker is going to ask you is, do you object to our sharing your contact information with the company with the person with the company whose shares you're buying? And almost everybody says no. I mean, the default is no. Okay, you don't object. All right? So you become at that point a non objecting beneficial owner. All right?

B (4:01)

And that contrast you talk about record.

A (4:05)

Yes.

B (4:05)

You know, like, so does that contrast with record owners just for edification?

A (4:09)

Yeah. Record date a record owners don't own them through a custodian. This is not, I mean, so you can, you can take, you know, you can own your shares directly with the custodian, with the transfer agent for the company. Okay. And that becomes important at some point if you want to like, you know, nominate directors and so forth. We talk about that another time. But companies use that record ownership as a, as a, as a way to understand directly who the shareholders are. But you know, again, you know, when they pull up a list of who their shareholders are, a company, you know, it'll show on the record list, you know, a lot of shares at Schwab, a lot of shares at Fidelity, you know, at all the brokers. But they don't know who the individual shareholders are because that's who the record owner is. But if you, if you're a nobo, if you did not object, the company can go ask for a list of those. No bows. I'll talk about that in a minute. So this is in contrast to oboes objecting beneficial owners. And relatively few shareholders know when they're kind of signing up for an account or whatever to object. It really isn't, you know, those are people who are really interested in privacy or don't want to get bugged by the company for some Reason, okay? But almost everybody's a nobody. Okay? I know in my holdings, I'm a Noble. I never, you know, with. And I hold my shares at Morgan Stanley is where my brokerage account is. And, you know, I get communication from Morgan Stanley, from companies. All right? So the thing about a nobo list, which is what Michael is asking about, is it's a detailed list of who your specific shareholders are, all right? Individuals and institutions. It lists your contact information, doesn't list your phone number, or sometimes it does. Doesn't list your email address, but you can sort of back into contact information, list your mailing. Whatever contact information the broker has for you, they can send it to the company. And they also list the number of shares that you own so that it's. It's one of the basic tools of activism, okay, is to get a copy of the nobo list from the company and use that to start to figure out who the shareholders are and start to talk to them and start to make your case to them. So the nobo list is actually quite valuable. So that's why activists request it, so we can have personal one on one conversations with big shareholders based on that list. I'll make another comment about that minute. But to answer the second part of the question is that it's much better than like 13F data, which is basically the filings that funds do to show their holdings, in part because you get so many different shareholders that are on a Noble list that don't necessarily file 13 Fs okay? So it provides a whole lot more better information about what the shareholder base is. Okay? So I'll make one other comment about what the nobo about getting the nobo list, which seems a little mysterious, but it's actually quite straightforward. Okay. You can get the Noble list from the company. You just have to request it. It's part of a, you know, books and records demand in Delaware corporations. That's a section 220 demand. And so whenever I request a list of shareholders as part of, you know, the basic activism work, I request the record list, which doesn't tell you much, as we talked about, but I also request the nobo list. Now, the company may or may not have the Noble list. That's what's so interesting about this, is that companies will sometimes request it, sometimes they won't. They may have an old one. Okay. But companies don't, you know, routinely, or some companies don't routinely get a copy of the Noble list, or maybe they'll get it for the last shareholder meeting so they'll have a Noble list as the record date from, you know, 2024, 2025 or something like that. So, you know, and if you do a books and records demand, you know, you can't require a company to get something they don't already have. So they have to have the nobo list. So sometimes you'll request the nobo list from a company and they'll say, I don't have it. I don't have a current one. And then what your next move is, is you call Broadridge and there's contact information for Broadridge. You could do this from Median too, but Broadridge is a little easier to work with and they cover a lot more of the shareholders, you know, real estate. And Broadridge will tell you the last nobo list that they sent to a company, because Broadridge is the custodian. They're the ones who have these Noble lists. And, you know, if a company is in the middle of a really hot solicitation or something like that, it'll get a copy. And sometimes they'll get nobo list several times. They have these cost money. These cost the company money to get one. So you can ask Broadridge, when's the last Noble list that, you know, I got for Microsoft or whatever the company? And they'll tell you. And then you go back to the company and say, oh, I know that the last nobo list you got was six months ago. Just send me that one. And then you have some really valuable information to work with.

B (9:38)

So question that's.

A (9:40)

Go ahead. Yeah.

B (9:41)

Doesn't the. If the noblest costs the company money to get?

A (9:47)

Yes.

B (9:48)

Wouldn't the company want to charge you if you're asking them for it?

A (9:53)

They'd like to. And sometimes they claim to. They'll say, oh, I'm going to make you pay the cost of getting it. But if they already have this information, which by definition they do here, they can only charge you, like, the cost of copying it. So if the Noble list cost them five or six thousand bucks, they really can't charge you the cost of obtaining it. They can just send you, try to charge you the cost of reproducing it, which is usually a fraction of that. And I've been involved in situations where companies have said, yeah, you got to pay me for the whole thing. And I say, no, that's not how this works.

B (10:27)

A copy is like 75 cents, I

A (10:29)

think value or electronic copy, you know, a Noble list fits is just a big spreadsheet. Yeah. So it's great. So anyway, so That's. That's noble lists. And I get them all the time. And they're fun reading. It's really interesting to kind of look at and say, oh, that guy's a shareholder. Oh, my God, I thought he sold his shares or the CEO owns that many shares or whatever.

B (10:50)

So only Mike Levin would say a no bolist is fun reading. Absolutely. All right, I got another question for you. All right, another question for you. This one's from a listener named Carl who asks, what's your best guess for the conditions under which an activist gets involved at Berkshire Hathaway and Bill Ackman and Howard Hughes holdings, which. I don't know the second one. But this. This is basically just what would it have to look like for Berkshire to get an activist or Howard Hughes to get an activist?

A (11:21)

Howard Hughes. Okay, I'll go to Howard Hughes and Ackman in a second. One of these is really interesting, which is, of course, Berkshire. And it's funny because I've wondered this for years. I don't own Berkshire shares. I have in the past. I don't now. Berkshire has some of the attributes of a classic subject for an activist. Okay. It's a huge conglomerate with a bunch of barely related businesses with immense. Just rivers of cash. And you. You know, and it has some of the characteristic, you know, some businesses are performing well, some aren't. Some are better than others. So. So, you know, it would be a classic company for an activist to try to do something with. But of course, as is well known, there's a couple of of, you know, exceptions to this. First, it's characterized by just the most patient investors in the world world, who of course love the now former CEO. But there's also a lot of insiders. Insider control, an activist project would run up against that insider control and obviously kind of fail. But that was one of the first things, is that. And Warren Buffett's cultivated this for years. It's just very patient capital. And any activist that says, hey, we need to get some of this cash back or something, would run into a management that very credibly says, no, no, no, just we don't want this. He's very patient. Okay? The other interesting attribute of how Berkshire kind of kind of built itself, and again, I'm glossing over just immense amounts of. Of study and research that's been done in the company is that in my estimation, Berkshire has thrived on essentially an ability to kind of underpay for its deals. Okay. You know, Berkshire is, of course, a very credible counterparty, you know, their checks clear or whatever. So, you know, it's a place that people go when they really need to get a deal done and they don't mind, you know, getting a little screwed in the process because then you become, you know, part of the Berkshire family and that kind of halo. So, you know, they underpay for these deals and then they hold them forever because of this patient capital. Okay. So that's sort of how this conglomerate looks, you know, again, forgetting the financial analysis that goes into it and so forth. But that's, that's kind of, in my view, kind of what. How Berkshire works now.

B (13:53)

But in the end, it doesn't really matter because it is dual class. Right. Like, it's. So, it's.

A (13:58)

Well, yeah, right. Exactly. Right.

B (13:59)

So, I mean, as an activist, you must be looking, first and foremost is, can I actually do something at the company?

A (14:07)

Right? Oh, absolutely. Well, but there's other. Other. That's kind of my flies. But there's other activists that just try to, like, you know, try to put some pressure on to sort of see what will happen. Okay. And that may happen here. The, the change in leadership along with just this. I think their cash holdings are somewhere in the range of 350 billion right now. I mean, it's just, it's just, it's the most cash they've ever had. And at some point, I gotta think that the pressure on the company to do something with this cash is going to start to build up that. Now that. And to his credit, Warren Buffett's done everything he can to try to smooth the path for Greg Abel to be the CEO and to sort of say, hey, you know, we're all, we're going to still be patient and so forth. But I got to think that there's going to be sort of a different kind or different level of pressure on the company to do something with its balance sheet now that Buffett is no longer CEO. Now he's still on the board, he's still born. She's still active in the company, of course, you know, even at 90, I think 96 or going to be 96. So he's, you know, going to be there to kind of defend this philosophy. But it'd be really interesting to see how they deal with, you know, conventional pressure to do something with cash that, you know, other companies deal with all the time now that they've had this kind of management transition. So that's one answer to the question about the conditions that there was this management change that combined with the cash and the fact that it's still a big conglomerate. That may lead to some pressure. Again, it's not necessarily going to be successful pressure, but there may be more voice for that. Let's talk for a minute now about Ackman and Howard Hughes. So Bill Ackman is obviously Bill Ackman, you know, activist investor, has all sorts of investment vehicles. One of them, though it's not literally his own vehicle, is Howard Hughes holdings, which is a publicly held, basically a real estate company. And he's the board chair and it's sort of an odd kind of company. It's thought that Ackman's kind of holding it as a vehicle for maybe potential activism at some point. Unlikely that this will be the target, even though the business has, you know, uneven performance and so forth. He controls almost 50% of the voting shares. So activism here would be unlikely unless it was some sort of really, you know, real disaster at the company right now. Like I said, it's. It's mostly a vehicle, potential vehicle for him to. For him to do stuff with.

B (16:44)

Unless of course, someone just doesn't. Unless of course, someone just doesn't like Ackman. Right, like.

A (16:48)

And which he's got plenty of enemies.

B (16:50)

He's got. I mean he's doing all sorts of crazy stuff. He's. He's starting to. He's spouting off in the press about all manner of things. If somebody doesn't like what he has to say, has some money, then they

A (17:01)

may just go after. That's actually a very good point that someone may decide to go after Howard Hughes for like non financial reasons basically

B (17:08)

to stick it to action, just to

A (17:10)

make life hard for him.

B (17:11)

Yeah, yeah.

A (17:13)

So those are those two. That's a great question from Carl, particularly about Berkshire. I've always kind of wondered what insulates Berkshire from acting pressure other than the cult of personality.

B (17:25)

Yeah, right. That's it.

A (17:27)

Right.

B (17:28)

You could say the same thing about Tesla. Right. Which it wasn't Carl's question, but Tesla is a increasingly underperforming company that is in constant need of cash. It's getting pushed out of markets. It's the deregulatory press has heard it and they have a mercurial leader who's got five jobs. Actually, forget Berkshire. Tesla seems like more of an activist play. And yet the cult of personality and

A (18:01)

again the insider control again. And that's a problem at Berkshire too, that there's enough. There's a lot in Buffett's hands that most activism will likely fail. But there could be some pressure because unlike Tesla Berkshire cares about its public reputation. And so if the pressure kind of mounts, they may say, okay, well, again, they susceptible. They bent into some pressure, created a second class of shares that were a little lower priced and so forth. So they've done some things to kind of nod towards shareholders and they may have to do more of that, you know, in the coming years. So we'll see. I don't know. Anyway, so those are two good questions. We got some others lined up we'd like to talk about, so why don't we, we do that in a minute. Okay, Matt. And we'll. All right, cool. We'll come back and talk about other stuff here at Shareholder Primacy.

B (18:54)

Shareholder Primacy is brought to you by freeflowanalytics.com the only free database of corporate directors, their influence and their performance. If you own a stock or retirement plan, go to free flow analytics.com and look up which of your elected directors are performing well and which aren't. Use your vote in the alternative democracy and get your data @free float analytics.com now back to the show. Welcome back to Shareholder Primacy. I'm Matt Moscardi and we are mailbagging. So let's continue mailbagging. Here is another question Mike from listener Rebecca.

A (19:35)

Okay, go ahead.

B (19:36)

Who asks, how does an activist investor handle EDGAR filings? Can you just do it yourself or do you need a law firm to do it? I am guessing Rebecca, based on this question, might be a lawyer looking for some big clients.

A (19:49)

So I happen to know this is an investor type of person.

B (19:54)

So can you do it yourself or do you need a law firm firm to do it?

A (19:58)

Okay. Edgar is really kind of interesting. I do some of my own EDGAR work. EDGAR filings. It's not as mysterious. It's a hassle in some ways, but it's sometimes even more expensive hassle to have like a law firm or other firms do it for you. So it kind of depends on the filing. You absolutely can do some of it yourself. There's no reason not to let me separate out. If you're involved in a proxy contest and you're doing a lot of like, proxy statements and so forth, you're going to want to have an attorney help you not only write the filings, but also probably file them. Okay. You'll need legal input as to, you know, how to comply with various parts of the proxy rules. You know what, what you need to say about a nominee, what you need to say about the shareholder. You know, what the timing looks like under universal proxy. There's all sorts of legal intricacies where you're going to want the legal input about how to actually do the drafting. Okay, but that's for, like I said, proxy statements. Okay. For preliminary proxy statements and the real ones and then revised ones. Okay. For a lot of other filings, you absolutely can do some of the drafting yourself, and you totally can do some of the filing. The actual working on EDGAR yourself without an attorney, first thing you need is you need like an account. You need to go to EDGAR filer management. There's a dropdown on the SEC website for that. And you go get login credentials. It's really easy. Anybody in the US can do it. And. And you got also have to sign up for an EDGAR ID if you don't even have that. But most people here who are listening or investors who want to do this kind of stuff probably already have an EDGAR ID or know that you'll need one. This is the unique identifier that allows you to be a, you know, file any kind of SEC filing. I have an EDGAR id. I've had it for years. And to get it there, you got to submit a bunch of paperwork. You got to apply for it basically. And EDGAR can take, I don't know what, I haven't done it lately. I'm wondering whether the SEC now has a bit of delay because of all this shutdown stuff and the lack of people. But it used to take like a week to get an EDGAR id. But along with that and login credentials, you can do some of your own filings. So let's talk about some of the others. The most straightforward actually are 13D filings for when you have an activist intent and you're over 5%. And 13G, when you don't have activist intent, but you have to file over five, you have over 5%. So those initial filings or amendments are really straightforward. The SEC actually has a form that you fill out that allows you to put all the information in. And for 13D, the key part is item four, you got to write that kind of. Well, but I've actually had some success copying others for some of the boilerplate. And you can, you can write all that yourself. And then you can just, you know, with your EDGAR ID and your login credentials, you can file a D. Now, again, if there's any kind of doubt, again, not a lawyer here, not giving legal advice. I'm just saying that it's possible, if you're comfortable doing this, to file Ds and GS on your own. Similarly, Form 3 and 4, which is you're holding if you're an insider, are also pretty easy to file. But in most cases a company, because you're, you know, disclosing shares in a company where you already own shares, the company usually kind of handles that for you. The form can be a little deceptive, but again, the filing is, is pretty straightforward on edgar. The one that I'll talk about that gets a little harder is what's called, the technical term is DFAN14A. It's basically supplemental proxy material. So if you're soliciting proxies and you're not actually doing the proxy statement, but you want to disclose a news release or a change to the website or some social media, those all go in this DFAN 14A. And that's something that again, you can do yourself. There's a different part of the EDGAR submission website you have to go to. So it's not a form you're submitting, you know, some sort of free form, basically a PDF type file. And the formatting gets a little weird and a little tricky. But again, you can do the submission yourself through an EDGAR account. And so as long as you've gotten the legal input, and again, if there's any doubt, you know, consult your favorite securities attorney. You can do this kind of consult. Rebecca, maybe like I said, do this all yourself, you know, on your own and basically save some money and have a little control over the process. But again, I'd caution you, as soon as it starts getting a little more complicated about what needs to go into a proxy filing or whether you need to file a 13, you might want to call a securities attorney to get a little input on that. But other than that, the actual navigating the EDGAR submission system takes a little bit of practice, but it's totally doable. Can I ask, you can kind of do it yourself.

B (25:32)

A follow up like, how does AI ruin this for everybody who hires a lawyer to do it?

A (25:39)

It ruins it a lot because there are people who have prepared, used, I don't know, chatgpt or used other AI engines to draft SEC filings and gotten totally wrecked. The citations are wrong, stuff's off. This is something where you might be able to ask your favorite AI tool to write a section of it or write a draft of the background to a solicitation or proxy statement or something like that. But you're going to have to work on it because the SEC is sufficiently vigilant about this stuff that they're going to find problems. Now, again, most of the time, the Worst that happens if you screw this up is you have to refile it and you may lose some time or conceivably you can miss a deadline. But using AI to do this stuff is a little risky. So I might ask it for input to parts of it, but I wouldn't ask it to write. Write this stuff. And hopefully all my securities lawyers friends are comfortable that I said that.

B (26:39)

Now they're probably happy that you said they're very happy. Still get a lawyer. People still get a lawyer.

A (26:45)

Exactly. Still might want to talk to a lawyer before you do this, you know, fully. So, anyway, yeah.

B (26:50)

All right, we go. We want to do one more. Let's do one more. Sure.

A (26:53)

Let's do one more question.

B (26:55)

All right, so this one is from Matt and I. It's not me. Honestly, it's a little suspicious that there was a Michael and a mat. Like, it sounds like we're just talking to ourselves. This one's not me. I don't know who.

A (27:07)

Okay, good. Great. All right.

B (27:09)

The question is, what exactly do proxy solicitors do? Why does an activist or a company need one? Why does anybody need a proxy solicitor?

A (27:16)

Okay, let me. Let me explain. It's pretty clear in activist worlds if you're an activist, why you need the lawyer. We've talked about that. Okay. Frequently we'll talk about, you know, not as often as they like. Activists will hire an investment banker usually to do valuations and to help with strategy, even hiring, like, public relations firms to help write news releases or help shape the messaging that's going to, you know, help with shareholders. But the proxy solicitor is always a little confusing, at least to people that are new to this. So let me try to explain what they do, because they're really critical at very important stages of an activist project. Okay. When you. Trying to interact directly with shareholders, actually talk to them and then get them to vote for you in various ways, it really helps to have this, this proxy solicitor, a really good one, working with you. Okay. What they do is two or threefold. First, they bring an intimate knowledge of a shareholder, of a company's shareholder base to the activist. Okay. You can get. We talked about this a little while ago. You can get lists of shareholders, okay. But you're not necessarily going to know who to call at some hedge fund or at BlackRock or someone to sort of pitch your project. Okay. You're not necessarily going to know kind of how they think or how they voted in the past. Okay. So a good proxy solicitor really understands that whole landscape of which shareholders are thinking in what ways? Okay. Relatedly, they will also be up to speed about shareholder voting policies. So all the big funds that you want to talk to generally have, you know, stewardship departments that have voting policies, well, you could go read all those or you could rely on a proxy solicitor that's kind of already interpreted all that for you. So you'll know whether Fidelity, you know, has a more of or less of an inclination to support your thesis for a company. Okay. So they just have this really good knowledge of more what institutional shareholders are thinking. Okay. They don't, you know, have this large database of individual shareholders that would be a little, a little much. Okay. So they kind of bring that to the, to the table. The second thing that they can help with is trying to understand and plan to how to solicit those. Okay. This is sort of a cousin of the first understanding of shells. But if you're going to say, okay, I want to solicit, you know, 80% of the shares because I think that's going to be cost effective, or I want to know how to get to all the retail shareholders, they will kind of help plan and budget for and know the best ways to actually reach various kinds of shareholders. They'll know how to, you know, get in touch with State street and what their stewardship team kind of wants out of meetings or, you know, a bunch of other institutional shareholders. They'll just be able to help kind of plan the approach to trying to persuade these shareholders that you're right and the company's wrong. Okay, so that's the second. So there's this whole planning exercise that they can help with. Then the third part is the actual processing of proxies. This is an enormous administratively rich hassle, okay. Trying to actually collect and understand all the systems and how stuff works with Broadridge and Mediant and so forth and, and, and chasing after all these people to actually get them to vote takes a lot of doing. And really good. Proxy solicitors have all sorts of tricks up their sleeve about how to reach out to these, these, all these shareholders. And this is individuals and institutions. They're really good at bird dogging this stuff, at helping people complete the paperwork. They have call centers that follow up on these shareholders. And so that's kind of. The third part is they actually can handle a lot of the, as I said, administratively rich process of actually compiling all this information and then going to a shareholder meeting, if you get that far, and presenting all the votes and taking a big stack of proxies and giving to the company and say, seeing Here, here's how we won. Okay, so there's those three kind of stages, and it's a little weird and they're not, you know, needed all the time, but, you know, understanding the shareholder base, planning how that part of the activist project kind of unfolds, and then finally actually executing on the collection and compilation and sorting out of all the votes is something that's, that's really critical. There's other things that proxy solicitors do. They serve companies by doing shareholder surveillance. Really good ones help with the strategizing at the early stages of a proxy contest. So it doesn't hurt to involve a proxy solicitor when you're just starting to think about this stuff. So there's other things that they'll help do. But those three main stages are where I think they're really essential to a good, good activist project. Hopefully that helps Matt whoever.

B (32:58)

I mean, they sound like matchmakers. They sound like a little bit.

A (33:01)

Yeah.

B (33:03)

I mean they're, they're like telling you like, oh, you know, you have a great little thesis that I'm sure so and so would love and they love to, you know, talk about this. You guys should just get together and hang out.

A (33:14)

Exactly. So, so they can, they can kind of, you know, because they're in touch with a lot of these shareholders very frequently during the year where an activist sometimes Only once every 2, 3 years needs to go reach out to shareholders. So they really bring that kind of experience and that knowledge of what will resonate, what will make sense to one another shareholder. So yeah, having a good one on your side of the table. And there's a couple that specialize in working with activists. Investor comm. Also, Okapi and Saratoga tend to do a lot of work with activists, so they kind of understand a little more about the investors. They also, I mean, all the solutions work with activists.

B (33:59)

I know.

A (34:00)

Yeah, go ahead.

B (34:01)

I know the Georgeson people, they ask for Georgiason, they're working with activists all the time.

A (34:06)

Right. And they also, you know, they also like working with companies as well. That's a lot steadier work, which honestly

B (34:13)

isn't that good, like, because, you know, you kind of know all ends of the everyone.

A (34:18)

Right? You understand. Exactly. Yeah, but I ecosystem having having a solicitor that really understands kind of what's driving an activist and kind of what motivates them and is willing to be a little flexible like in charging fees that often, that often helps me at least. So there's some activists that I, that I know that again prefer some of the ones that have a little more of a specialty in, in working for, you know, dissidents, as we say. So. Yeah, so that's proxy solicitors. There's, there's a really interesting community of people and, and really kind of help in some very important ways.

B (34:52)

All right, I, I think it's hardly enough. That's enough mailbagging for today.

A (34:56)

Fine. Great.

B (34:57)

But I do think, I do think if there are other questions, that people should reach out. Mike gave it at the top, but it's Shareholder Primacy at Free Float llc. Send it to the mailbox and we'll mailbag you when we get there.

A (35:13)

Absolutely. I love it. So let's, let's wrap up. We can hopefully get Ann back on here next week and then talk about something, something else. Okay. This is Shareholder Primacy, hosted by Ann Lipton and me, but this week, hosted by Matt Muscardi and me. I'm an independent activist investor and advisor to investors about their activist situations. Matt, of course, is the founder of Free Float analytics and also the producer and director of our show here. And just to remind people who she is, is professor of law and Lawrence W. DeMuth, chair of business Law at the University of Colorado Law School. You can find me, Mike, at theactivistinvestor.com and you can find Matt@freefloat. LLC. Thanks for listening. We'll talk again soon. Sam.