Anti-Woke Marketplace PublicSquare Looks for ESG Rule Loopholes

Fresh off its summer initial public offering, the conservative e-commerce company PublicSquare has a novel business and legal strategy: Find loopholes in public-company regulations its executives believe are antithetical to its anti-woke brand.

The venture started in 2021 as an online directory of businesses that had affirmed conservative beliefs, and went public in July. The brand, much like the businesses on the platform, touts a conservative ethic and is part of a broader movement to support merchants that do not factor environmental, social and governance concerns into their business decisions.

As it works to cement its place atop the conservative shopping ecosystem, PublicSquare’s leader has also expressed a distaste for ESG regulations conservatives have labeled as “woke,” like the Securities and Exchange Commission’s pending climate disclosure and potential human capital rules or Nasdaq’s board-diversity requirements, the latter of which were recently upheld in court.

“We’re not afraid to set some precedent if it comes to that, and push back against some of the forces that are trying to act in a way that we believe is sort of antithetical to the true dream of real equality,” PublicSquare CEO and founder Michael Seifert, 28, said in an interview with Bloomberg Law.

The West Palm Beach, Florida-based company will actively try to skirt any regulations that run counter to the company’s brand, Seifert added. While he was talking broadly about regulations his company now has to follow and did not threaten lawsuits over any specific rule, Seifert said the company adamantly opposes incorporating diversity, equity and inclusion into the business.

“Anything that we do related to ESG and DEI that whenever we even talk about it, is purely to rebuke it,” Seifert said. “And by the way, people on our staff are happier because of it—it’s not seen as some sort of social engineering experiment.”

Federal agencies expect and hope companies will “blindly” follow rules and regulations, Seifert said, adding that he thinks regulators “know” their rules won’t hold up legally if they make it to the Supreme Court. “If it ever comes time to defend that to any sort of regulatory agency, that’s something that we’re absolutely going to put resources behind doing,” he said.

Legal Strategy

PublicSquare’s plans for rejecting “woke” regulations might not be as unique as they sound. Any disclosure loopholes that the online marketplace might find are likely already being sought out or employed by other businesses, said Angeli Patel, executive director at the Berkeley Center for Law and Business.

Companies regularly disclose just enough to satisfy regulators—and shareholders—while holding as much information as possible behind the curtain of proprietary company information, Patel said. “Even companies that are trying their best to be transparent about ESG risk factors and impact, they too are measured about what they’re putting out there so they can back up what they’re saying,” she said. “It’s nothing different from what companies are already doing.”

Still, there’s no getting around whatever rules public companies are required to follow, Patel said. “In reality you still have to comply with regulations or you’re in violation of the law,” she said.

PublicSquare hired Stephen Moran to be its chief legal officer and general counsel in March. Moran previously worked as the top lawyer for Nearmap Ltd., an aerial-imaging firm based in Australia, and Nuvve Holding Corp., a company based in San Diego that provides electric-vehicle support.

At Nuvve, he helped take the company public through a blank-check company—just like PublicSquare. Seifert said Moran is well-acquainted with the world of securities law “and its ever-shifting requirements or expectations.”

“I think what you’ll find, as you look closely into some of these things, is that many of them are built with loopholes,” Seifert said. Nasdaq’s rule, for example, allows companies to explain why they don’t need to diversify their board.

While Seifert said PublicSquare would seek loopholes in regulations, the company still affirmed it will follow all applicable rules and laws, according to its code of business ethics.

Data Plan

PublicSquare is banking on its strategy to grow into a fully parallel economy to rival online-shopping behemoth Amazon, without following completely in Amazon’s footsteps.

For example, when the company opened its e-commerce site Nov. 1, it allowed customers to shop from different vendors and check out using one cart. Previously, the platform was a directory of businesses requiring shoppers to visit each vendor’s website and complete separate transactions for their purchases.

PublicSquare also opened its first direct-to-consumer products line in July under the EveryLife brand: baby diapers and wipes. EveryLife explicitly stands for anti-abortion causes similar to other businesses on the platform like Seven Weeks Coffee, which supports pro-life organizations with its profits.

Shares of PublicSquare dropped sharply after the public offering but have since hovered above $5, bucking the trend of many companies that went public via special acquisition company, or SPAC, that now trade below $1. A SPAC is a publicly traded company that has no business, but was formed explicitly to merge with a private company in a transaction called a “de-SPAC” to take it public.

In an August earnings call—the company’s first—Seifert said there were more than 65,000 vendors as of July 31 and 1.2 million users as of June 30, and each had nearly doubled since the beginning of the year.

More direct-to-consumer products are coming, Seifert said. Using its own trove of data gathered from users and vendors, the company will look for “holes” in what consumers want based on their searches and what vendors are offering.

What PublicSquare says it won’t sell, however, is user or vendor data. For now, Seifert said, the company has a “pretty firm stance against monetizing” data even though it has been “approached with big checks” from all corners of the data-use universe, including political operatives.

The still-private conservative-job posting site RedBalloon, which partners with PublicSquare is on board with keeping data private.

RedBalloon CEO Andrew Crapuchettes also said that while his company collects and shares data as part of its mission to match prospective employees with employers, it does not attempt to further monetize that information.

“There’s going to be some interesting aggregate data that’s going to start coming out of our work,” Crapuchettes said. “But I never want to betray the privacy of our businesses—we’ve all had that done to us, and I never want to do to someone else what I wouldn’t want done to me.”

That poses a potential problem for current and prospective investors on the business side of the companies. Tech companies bring in revenue from monetizing the vast amount of data they collect. To forgo that massive money-making opportunity could constrain growth, said D.A. Davidson Managing Director and senior research analyst Tom Forte, who covers online-marketplace giants Etsy, Wayfair, Amazon and Apple.

Leaving money on the table isn’t a good look from the market’s perspective, however noble the intent may be, Forte said.

“I like to talk about scale: Which is greater—the money that they’re gaining by being pro-privacy, or the money that they’re losing by not monetizing the data?” he said. “Data is the new oil.”

‘Stakeholderism’

Seifert takes pride in the fact that PublicSquare has a “practically zero ESG score” among rating agencies, though that may be because the business is still in its infancy. Raters take into account dozens of different factors when evaluating companies’ operations and analyzing available disclosures.

But for all its anti-ESG, anti-regulation stances, it’s actually operating as a stakeholder-centric company, UC Berkeley’s Patel said. That includes the company’s adamant stance against monetizing data.

Patel said that any company trying to understand the risks and opportunities associated with its stance on environmental or social issues—like PublicSquare—is actually taking ESG into consideration.

“ESG is about stakeholderism, it’s not necessarily about the specific stance that a company has,” she said. “It’s about the governance of environmental and social impact, and how they measure it and how they disclose it.”