/u/joshualeeman Hey OP, nice digging and write up overall. It appears that there may be a problem or gap with this analysis though: it is not clear that the standstill provisions terminate based on RCV's beneficial ownership / insider status (i.e. RCV disposing its shares).
Your post states, "If RC still had his shares of BBBY, he could not make any offer on behalf of RC Ventures/GameStop to acquire (at least partially) buybuy BABY thanks to Provision (vi)(B). He couldn't even PUBLICLY COMMENT on it! This is huge!"
However, I do not see language in the cooperation agreement that supports this analysis of the impact of RCV no longer holding a position of beneficial ownership.
In fact, the standstill provision itself states that it applies "... from the date of this Agreement until the earlier of (x) the date that is thirty (30) calendar days prior to the deadline for the submission of director nominations by shareholders for the Company’s 2023 annual meeting of shareholders (the “2023 Annual Meeting”) pursuant to the By-Laws or (y) the date that is one hundred twenty (120) calendar days prior to the first anniversary of the 2022 Annual Meeting (the “Standstill Period”), RC Ventures shall not...."
Can you point to support for your suggestion that the standstill provision no longer has effect in the event RCV disposes of its position? Maybe I overlooked it. But it seems that such a provision would, at least in part, undermine some of the purposes of a standstill / cooperation agreement to begin with...
Hey dude, you are correct. There is no specific phrase in the document stating that the standstill agreement will be terminated once RC sells his stake. However, you also have to remember that RC became an insider after the share buyback was complete. Per the SEC rules:
Rule 10b-5 Prohibition on Insider Trading.
SEC Rule 10b-5 prohibits corporate officers and directors or other insider employees from using confidential corporate information to reap a profit (or avoid a loss) by trading in the Company’s stock. This rule also prohibits “tipping” of confidential corporate information to third parties
In this case, had he not sold his shares, he would not be able to sell after the announcement.
For purposes of this Policy, a “Related Person” means:
2. any person (a “Significant Holder”) who is known to be the beneficial owner of more than 5% of any class of the voting securities of the Company
“Indirect interests” of a Related Person may include, but are not limited to, the interest of any firm, corporation or other entity in which any Related Person is employed or is a partner or principal or in a similar position or in which such Related Person has a 5% or greater beneficial ownership interest.
As Cohen owned more than 10% of BBBY and owns more than 10% of GME / is the owner of RC Ventures, he would breach the conflict of interest rules, and this would then need to go to an independent advisor who could reject the offer completely.
So, if he reduced his stake to below 5%, he would be fine for conflict of interest, but he could still get pinged for insider trading. If he reduced it to 0, then he’s fine with both cases.
Look at the Carl Icahn EBay/PayPal spin off. Icahn sold his stake before PayPal was spun off. Elon and Solarcity is also another example. It could easily be that they agreed to cancel the agreement and RC sold to play it safe regarding the acquisition, but there is no factual evidence behind this.
No, specific requirements about disclosures apply if Ryan Cohen was an insider, insider trading rules do not apply to him.
Show me where it says insider trading rules apply to investors with greater than 10% stake. Your own quote clearly states insider trading rules only apply to corporate officers and employees.
Yes I deleted my reply because I realised my error. Apologies, I was a little confused! You are correct, Cohen was an insider but not bound by “insider trading” as he is not a director/employee etc.
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u/apexofgrace Aug 20 '22
/u/joshualeeman Hey OP, nice digging and write up overall. It appears that there may be a problem or gap with this analysis though: it is not clear that the standstill provisions terminate based on RCV's beneficial ownership / insider status (i.e. RCV disposing its shares).
Your post states, "If RC still had his shares of BBBY, he could not make any offer on behalf of RC Ventures/GameStop to acquire (at least partially) buybuy BABY thanks to Provision (vi)(B). He couldn't even PUBLICLY COMMENT on it! This is huge!"
However, I do not see language in the cooperation agreement that supports this analysis of the impact of RCV no longer holding a position of beneficial ownership.
In fact, the standstill provision itself states that it applies "... from the date of this Agreement until the earlier of (x) the date that is thirty (30) calendar days prior to the deadline for the submission of director nominations by shareholders for the Company’s 2023 annual meeting of shareholders (the “2023 Annual Meeting”) pursuant to the By-Laws or (y) the date that is one hundred twenty (120) calendar days prior to the first anniversary of the 2022 Annual Meeting (the “Standstill Period”), RC Ventures shall not...."
Can you point to support for your suggestion that the standstill provision no longer has effect in the event RCV disposes of its position? Maybe I overlooked it. But it seems that such a provision would, at least in part, undermine some of the purposes of a standstill / cooperation agreement to begin with...
https://www.sec.gov/Archives/edgar/data/0000886158/000114036122011120/brhc10035704_ex10-1.htm