Assuming the instrumentality analysis is correct, we agree.
Question
From: Shaffer, Kristin <kshaffer@ftc.gov>
Sent: Friday, May 17, 2024 2:05:16 PM (UTC-05:00) Eastern Time (US & Canada)
To: [Redacted]
Cc: HSRHelp <HSRHelp@ftc.gov>
Subject: RE: HSR Inquiry - 802.21/802.30
[Redacted]
Assuming the instrumentality analysis is correct, we agree.
Best regards,
Kristin
From: [Redacted]
Sent: Thursday, May 16, 2024 9:38:00 PM (UTC-05:00) Eastern Time (US & Canada)
To: HSRHelp <HSRHelp@ftc.gov>
Subject: HSR Inquiry - 802.21/802.30
Dear PNO:
I write to confirm my analysis of an upcoming acquisition of voting securities. Company A has two classes of voting securities: Class 1, which entitles holders to one vote per share, and Class 2, which entitles holders to twenty votes per share. Historically, the majority of Class 2 shares have been held by Investor A and the CEO of Company A, and neither Investor A nor the CEO held 50% or greater of Company A’s voting securities.
Last week, Company A received notice that Investor A unilaterally elected to convert a substantial majority of the Class 2 shares it holds into Class 1 shares, which it then sold. Company A had no prior notice of or involvement in the decision by Investor A to convert its Class 2 shares into Class 1 shares.
As a result of Investor A converting the Class 2 shares it held, the CEO’s voting percentage in Company A increased to over 50%. Accordingly, today, the CEO is the ultimate parent entity of Company A.
The CEO will have restricted stock unit awards vest next week and will, as a result, acquire additional Company A voting securities. Within the past 5 years, the CEO filed an HSR notification at the $500 million HSR threshold in 801.1(h), meaning that, pursuant to 802.21, the CEO would have to file HSR again in order to make an acquisition that would increase his/her holdings to meet or exceed the 50% threshold.
I wanted to confirm my analysis as to the events described above:
- The event that caused the CEO’s voting percentage to increase above 50% was Investor A’s decision to convert its Class 2 shares. So long as the CEO was not instrumental in causing Investor A to convert the shares, the CEO did not have an obligation to submit an HSR filing to report the increase in voting percentage above 50%.
- Today, the CEO is the ultimate parent entity of Company A. This means that the receipt of Company A voting securities through the vesting of restricted stock units next week is exempt as an intraperson transaction under 802.30 and an HSR filing is not required.
- If, in the future, the CEO’s voting percentage of Company A dips below 50% because he/she converts or sells Company A voting securities, the CEO would need to submit an HSR filing and indicate the 50% threshold before he/she could acquire additional voting securities that would take his/her voting percentage above the 50% threshold again.
I appreciate your confirmation on the analysis above. Please let me know if you have any questions.