SEC Issues Proposed Rules to Implement Title II of the JOBS Act
Last Wednesday the SEC submitted for comment proposed rules to implement Title II of the JOBS Act, which would remove the prohibition on general solicitation for certain private placement offerings.
- The current 506 exemption will remain in place, and 506(c) will provide for the new rule, which lifts the ban on general solicitation.
- The SEC is proposing a flexible “facts and circumstances” test to determine whether offerors took reasonable steps to verify the accredited status of an investor.
- Form D will be amended to include a check box for 506(c) offerings, enabling the Commission to track the quantity of 506(c) offerings being made.
- Almost all of the “protective provisions” suggested by commenters are absent from the proposed rule. The absence of sufficient protections was the source of the one vote (Commissioner Aguilar) opposing the proposed rule.
New (Corporate) Investors in Venture Capital Markets
Ford, General Motors, and American Express are among those multinational corporations that have recently focused efforts on investing in Silcon Valley startups. Venture Capital firms, which offer cash in exchange for an equity investment, and corporate acquirers, companies like Google and Facebook that acquire tech startups for their products and people, are common players in the tech startup field. But recently an almagamation of the two has entered the scene: multinational corporations are investing in companies as a way to diversify holdings, and to get a pulse on the latest developments in technology. We’ll have to wait and see whether these multinationals stick around in the startup landscape, or return to more traditional locales for their investments.
Mergers & Acquisitions
$33 Billion Takeover Bid not Well-Received by Many Xstrata Shareholders
Glencore International, a commodities trader, has offered $33 billion in its takeover bid for Xstrata, a producer of coal, copper, and zinc. Glencore is only offering an 8% premium in its bid, the second lowest offer for a mining deal worth more than $5 billion. Glencore currently owns 34% of Xstrata, but Qatar Holding LLC owns 12%, and has come out against the bid publicly. Knight Vinke Asset Management, a New York firm and another prominent Xstrata shareholder has also come out against the takeover bid. Xstrata is traded on the London Stock Exchange, and under UK regulation, if Glencore fails in its takeover bid it will likely be prohibited from making another offer for 12 months, but it appears that Glencore will not make an improved offer. Xstrata shareholders are scheduled to have a crucial vote on Friday the 7th.
Alternative Dispute Resolution
Federal Court Rules Secret Arbitration Proceedings by Chancery Court Unconstitutional
A federal judge ruled that Delaware’s Chancery Court cannot hold private arbitration proceedings. In 2010, the Delaware legislature passed a law allowing for the court’s chancellors to arbitrate private matters, keeping the rulings out of the public domain. The arbitration proceedings were seldom used, only 6 times according to Professor Steven M. Davidoff. The proceedings weren’t popular, perhaps because the court’s ability to maintain the privacy of the proceedings has been challenged nearly from the start. The basis of the federal court’s opinion revolved around the notion that the proceedings were essentially civil trials, and civil trials are required to be open to the public, which have qualified access to civil and criminal trials.