'kevinh' pid='32859' datel Wrote:

I actually think this article is pretty balanced and straight forward. Just because the shares are locked up doesn't mean they cannot be pledged for a loan.

I think even without the amendment the Class B shares can still be pledged right now. The amendment sounds like it just automatically converts Class B shares to Class A shares when they are pledged, sold, or transferred to outside parties

'thecrazykevy' pid='32860' datel Wrote:

'kevinh' pid='32859' datel Wrote:

I actually think this article is pretty balanced and straight forward. Just because the shares are locked up doesn't mean they cannot be pledged for a loan.

I think even without the amendment the Class B shares can still be pledged right now. The amendment sounds like it just automatically converts Class B shares to Class A shares when they are pledged, sold, or transferred to outside parties

Yes, they could be pledged now but should the loan not be repaid, whoever provided the loan gets Class B shares and preferential voting rights. Now the shares can be pledged and they would lose the preferential voting rights should the loan be unpaid. The question in my mind is, why are they doing this now?

'thecrazykevy' pid='32860' datel Wrote:

'kevinh' pid='32859' datel Wrote:

I actually think this article is pretty balanced and straight forward. Just because the shares are locked up doesn't mean they cannot be pledged for a loan.

I think even without the amendment the Class B shares can still be pledged right now. The amendment sounds like it just automatically converts Class B shares to Class A shares when they are pledged, sold, or transferred to outside parties

I got the sense that the new language makes it so that shares convert from B to A if theres a default in the pledged shares. That seems to be the material change. If there are any lawyers on here that could opine, that would be helpful. Also, anyone know if these changes were proposed pre-MW or post MW?

Heres the original language from the articles of association (link: http://www.sec.gov/Archives/edgar/data/1509986/000095012311025625/h04742exv3w2.htm)

(iii) Upon any sale, pledge, transfer, assignment or disposition of Class B Common Shares by a holder thereof to any person or entity which is not an Affiliate of such holder, a Founder or a Founder’s Affiliate, each such Class B Common Share shall be automatically and immediately converted into one Class A Common Share; provided that, except as set forth in Article 6(d)(iv) below, a change in the beneficial ownership of Class B Common Shares from a holder of Class B Common Shares to an Affiliate of such holder shall not cause a conversion under this Article 6(d)(iii). In addition, if at any time more than fifty percent (50%) of the ultimate beneficial ownership of any holder of Class B Common Shares (other than the Founders or the Founders’ Affiliates) changes, each such Class B Common Share shall be automatically and immediately converted into one Class A Common Share. For the avoidance of doubt, the pledge, transfer, assignment or disposition of Class B Common Shares by a holder thereof to any of the following shall be exempt from, and not trigger, the automatic conversion contemplated under this Article 6(d)(iii): (i) a Founder or a Founder’s Affiliate or (ii) to a limited partner or a shareholder of such holder.

     (iv) For the avoidance of doubt, a transfer shall be effective upon the Company’s registration of such transfer in its Register of Members. For purposes of Article 6(d)(iii) and Article 6(d)(iv), “beneficial ownership” shall have the meaning defined in Rule 13d-3 under the U.S. Securities Exchange Act of 1934, as amended.

     (v) Any conversion of Class B Common Shares into Class A Common Shares pursuant to these Articles shall be effected by means of the re-designation of the relevant Class B Common Share as a Class A Common Share. Such conversion shall become effective forthwith upon entries being made in the Register of Members to record the re-designation of the relevant Class B Common Shares as Class A Common Shares.

     (vi) Save and except for voting rights and conversion rights as set out in Articles 6© and (d), the Class A Commons Shares and the Class B Common Shares shall rank pari passu and shall have the same rights, preferences, privileges and restrictions.

'kevinh' pid='32863' datel Wrote:Yes, they could be pledged now but should the loan not be repaid, whoever provided the loan gets Class B shares and preferential voting rights. Now the shares can be pledged and they would lose the preferential voting rights should the loan be unpaid. The question in my mind is, why are they doing this now?

Isn't setting the rules for converting super voting shares to normal shares when they are sold by insiders usually done prior to the IPO?  Do you know where we can read their current Articles of Association so we can see what the current Article 6(d)(iii) says?

Maybe this isn't about pledging shares but rather the founders want to cash out on some shares next year after the lockout expires in Sepetmber 2014. I guess another theory might be they don't have all of $3 million in spare cash to buyback shares personally and needs to pledge some shares to get the money.

'kevinh' pid='32867' datel Wrote:That is the way I'm reading it too. If there's a default, the shares become property of the lender and converted to class A automatically. Are they planning to pledge the shares? If so, why? The company has $100M in cash to grow and expand.

I think the key takeaway is that they could already pledge shares before this amendment. The new terms only spell out when those shares convert from B to A in case of a default.

'kevinh' pid='32867' datel Wrote:That is the way I'm reading it too. If there's a default, the shares become property of the lender and converted to class A automatically. Are they planning to pledge the shares? If so, why? The company has $100M in cash to grow and expand.

I don't think this is about the company itself pleding shares for a loan if that's even possible. I think this relates to the founders of NQ who own super voting shares and pledging those shares to borrow cash for personal use.

(12-05-2013, 07:09 AM)thecrazykevy Wrote:

(12-05-2013, 06:43 AM)kevinh Wrote: That is the way I'm reading it too. If there's a default, the shares become property of the lender and converted to class A automatically. Are they planning to pledge the shares? If so, why? The company has $100M in cash to grow and expand.

I don't think this is about the company itself pleding shares for a loan if that's even possible. I think this relates to the founders of NQ who own super voting shares and pledging those shares to borrow cash for personal use.

On a side note, I have wondered where the founders came up with the $5M to repurchase shares on the open market (management repos). I did not get the sense that senior management was rolling in $$$. Possibly money from the initial IPO?

tradestar2012 dateline='<a href="tel:1386191691">1386191691</a>' Wrote:

thecrazykevy dateline='<a href="tel:1386191362">1386191362</a>' Wrote:

kevinh dateline='<a href="tel:1386189785">1386189785</a>' Wrote: That is the way I'm reading it too. If there's a default, the shares become property of the lender and converted to class A automatically. Are they planning to pledge the shares? If so, why? The company has $100M in cash to grow and expand.

I don't think this is about the company itself pleding shares for a loan if that's even possible. I think this relates to the founders of NQ who own super voting shares and pledging those shares to borrow cash for personal use.

On a side note, I have wondered where the founders came up with the $5M to repurchase shares on the open market (management repos). I did not get the sense that senior management was rolling in $$$. Possibly money from the initial IPO?

Many big US companies have this exact clause but it goes into effect at IPO automatically.  I literally think all it does is preserve the "founders" special powers so only founders ever have it.  I mean what happens if they sell shares 5 years from now?  So whether they dispense any of their shares 5 days or 5 years from now, as a shareholder I don't want anyone else to be able to buy "founders" shares and this prevents it.

Also I have to admit in many cases being quoted by thestreet.com could be more embarrassing than enjoyable however in this article the author didn't just steal our opinions, he stole them and verified the veracity of those opinions with "experts" who should, ostensibly at least, know what the heck they are talking about.

MOST IMPORTANTLY OF ALL!!! The author had the good sense and better even better taste to choose Kenh and I to quote basically. Anyone who actually likes what I have to say is clearly a gentleman and a scholar! LoL. j/k of course even tho this does seem to be a pretty tough crowd. t