December 11, 2008

Renewal Time

Since all our memberships expire at the end of this month, please renew today at our “Renewal Center” for:
The Corporate Counsel print newsletter
The Corporate Executive print newsletter
Section 16 Annual Service
Romeo & Dye’s Section 16 Filer
Compensation Standards print newsletter
Deal Lawyers M&A print newsletter

Comprehensive Price List: Here is a PDF that is a universal order form with the 2009 prices for all of our publications and web sites.

Registered Direct Offerings: An Alternative to Underwritten Deals

As noted in this article, the unprecedented turmoil in the capital markets have caused many companies to consider alternatives to traditional underwritten public offerings. In this podcast, Lora Blum of Jones Day discusses registered direct offerings, including:

– What is a registered direct offering, and how is it different from a PIPE?
– Do you need an underwriter or placement agent to do a registered direct offering?
– Why might a company consider doing a registered direct offering?
– What kind of company could benefit from doing a registered direct offering, and what are the pitfalls a company considering such an offering should be aware of?

Delaware Court of Chancery Disapproves Class and Derivative Settlement

From Travis Laster: Opinions disapproving settlements are usually worth noting, since no one wants to work out a deal and then have it fail to pass muster. In a recent decisionOff v. Ross (Del. Ch. Ct.; 11/26/08) – Vice Chancellor Parsons disapproved a class and derivative settlement. Several factors led to settlement disapproval:

1. Timing – The case settled four days after the plaintiff moved for expedited proceedings. A blindingly fast settlement often raises questions. I once had a case that settled in a week, and it took us 3 hearings to get it approved.

2. Lack of confirmatory discovery – The plaintiffs did not take any discovery pre-settlement and, amazingly, did not take any confirmatory discovery after settling. In my experience, defendants are sometimes pleased when plaintiffs are willing to forgo confirmatory discovery, particularly the standard 1 or 2 confirmatory discovery depositions. This is penny wise and pound foolish, as it contributes significantly to the risk of disapproval.

3. Minimal consideration for seemingly strong claims – The plaintiffs settled claims that arguably invoked the entire fairness standard in return for an agreement that the company would proceed with a rights offering that the record strongly suggested was what the company planned to do all along. In other words, the value of the settlement was suspiciously weak. This is a recurring issue with disclosure-only settlements, when it’s best to think at least twice.

4. Objectors to the settlement and a competing action in another jurisdiction — The weaknesses of the settlement were laid bare by two objectors to the settlement, one of whom was a plaintiff in a competing action in another jurisdiction. Although the parties tried to carve out the other action from the release, the defendants reserved the right to seek dismissal of the action based on the settlement. The existence of motivated objectors always heightens the risk that a settlement will not be approved.

5. A significant attorneys fee of $800,000.

With this confluence of factors, this was a high risk settlement to present.

– Broc Romanek