Carlyle Group’s IPO papers include – so far – terms purporting to preclude future class actions over securities disclosures. Ahead should be a decision by the SEC on what it will say about the use of such terms. The story in a bit of detail is on the Conglomerate blog. The overall terms of the IPO are characterized in more detail – and more harshly – by Professor Davidoff in a very pointed article on DealBook. As he notes, the offering also eliminates most other traditional shareholder rights.
The issues are important in many ways. Over time, the answers on the issues will impact companies that face mass tort claims because some of the companies face significant uncertainty, and also have a very real need to maintain a workable capital base.
Good, bad or otherwise, the reality of the marketplace is that financiers and lawyers will always be moving faster than government and existing laws and regulations. Simply including the terms in the IPO – if allowed – will create uncertainties and leverage that would not otherwise exist. Set out below is the introduction to Professor Davidoff’s article – the entire article is well worth a read.
"It is quite possible that the Carlyle Group, the private equity firm that is preparing to go public, is proposing the most shareholder-unfriendly corporate governance structure in modern history.
It starts with the fact that Carlyle is providing its soon-to-be public shareholders with no power over the company. Carlyle shareholders will have no ability to elect directors. Instead, Carlyle intends for the company to be controlled by its management, primarily its co-founders: Daniel A. D’Aniello, the firm’s chairman, and William E. Conway Jr. and David M. Rubenstein, the co-chief executives. They will have special power to elect Carlyle’s board of directors as long as they and Carlyle’s affiliates own more than 10 percent of the company."
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