Our Israel Practice newsletter covers topics of interest to our Israeli clients and contacts and our recent Israel Practice Activities. In this issue, we cover our Poison Pill Deep Dive Series; how FDA is monitoring the COVID-19 product market; the role of ESG in start-ups; SEC’s Office of Compliance Inspections and Examinations’ recent Risk Alert concerning private fund managers; and the new Paycheck Protection Program Flexibility Act.
Morrison & Foerster Israel Practice Activity
- We represented Astroscale U.S., Inc., the U.S. unit of Astroscale Holdings Inc., the market leader in securing long-term orbital sustainability, in its proposed acquisition of assets from Effective Space Solutions R&D Ltd., an Israeli satellite life-extension and servicing company. The proposed acquisition will make Astroscale the only company solely dedicated to on-orbit services across low-earth (“LEO”) and geostationary (“GEO”) orbits and bring Astroscale closer to realizing its vision of orbital sustainability for future generations. This transaction also signifies the first acquisition of an Israeli space technology company by a foreign company.
- We were involved in National Instruments’ acquisition of Israeli big data analytics start-up OptimalPlus for $365 million, serving as counsel to the buyer’s financial advisor. Following the completion of the deal, OptimalPlus’ Israeli offices will become National Instruments’ R&D center.
- We represented Institutional Venture Partners (IVP)in its Series F financing of Zerto, an Israeli provider of disaster recovery software.
- We advised the board of directors of DSP Group, an Israeli wireless chipset solutions company, on the acquisition of SoundChip S.A.
- Poison Pill Deep Dive Series
An increasing number of companies are considering the adoption shareholder rights plans (otherwise known as “poison pills”) in response to the market volatility that has resulted from the COVID-19 pandemic. Our six-part series examines six specific and evolving rights plan provisions and considerations that go along with them:
- The Inadvertent Triggering Exception
Focuses on an exception that is contained in most rights plans for when an acquiror’s ownership percentage goes above the specified threshold “inadvertently.”
- Grandfathering Existing Stockholders
Focuses on a clause in most rights plans that grandfathers existing stockholders whose ownership stakes are at or above the specified threshold at the time the plan is adopted.
- Acting in Concert
Focuses on provisions in rights plans that expand the circumstances in which stockholders will be grouped together and have their ownership aggregated to account for stockholders acting with some amount of collective intent and coordination.
- Triggering Percentage
Focuses on the ownership percentage that, if exceeded by a stockholder without board approval, triggers the dilutive effect of the rights plan.
- Last Look
Focuses on a provision in some rights plans that allows a company’s board a “last look” at redeeming the rights outstanding under a triggered plan before the plan’s dilution takes effect.
- Qualifying Offer
Focuses on a provision in some rights plans that gives stockholders the power to cause an offer to be exempted from the rights plan if it meets certain criteria.
- How FDA Is Monitoring the COVID-19 Product Market
The FDA is actively “monitor[ing] the online ecosystem for fraudulent products peddled by bad actors seeking to profit from this global pandemic.” The agency says it has discovered hundreds of fraudulent COVID-19 products, including drugs, test kits, and PPE sold online with unproven claims. It is working with online marketplaces, domain name registrars, payment processors, and social media websites to remove unproven claims from their platforms.
- The Role of ESG (Environmental, Social, Governance) in Start-Ups
Founders of start-ups might hear “ESG” (environmental, social, governance) or “sustainability” and think those terms are simply buzzwords that are not relevant to their start-ups. However, savvy entrepreneurs, innovators and investors are increasingly considering ESG issues as essential drivers for success in today’s markets. On the flip side, poor ESG practices can lead to significant drops in customer growth, increased legal expenses, and, in extreme cases, the temporary or permanent loss of a legal license to operate.
ESG decisions may become more important than ever in a post-COVID-19 market. Israeli companies and VC funds would do well to pay attention to the role of ESG, especially those seeking U.S. investment.
- OCIE Publishes Observations from Examinations of Private Fund Managers
On June 23, 2020, the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) published a Risk Alert identifying common deficiencies and compliance issues it has observed in examinations of registered investment advisers that manage private equity funds or hedge funds. Among other things, OCIE noted that these deficiencies may have caused investors in private funds to pay more in fees and expenses than they otherwise might have. OCIE divides the issues into the following broad categories, which are addressed in the alert: (1) inadequate disclosure relating to conflicts of interest; (2) fees and expenses; and (3) policies and procedures relating to material non-public information (“MNPI”).
- Congress Passes PPP Revisions and Advocates for Public Disclosure of Recipients
Congress has passed new legislation, the Paycheck Protection Program Flexibility Act, which was signed into law on June 5, 2020. The Act extends the time borrowers have to spend PPP funds from 8 weeks after origination to the earlier of 24 weeks after origination or December 31, 2020, and reduces the overall percentage that must be spent on payroll costs, from 75% to 60%. Also, the legislation adds additional flexibility for businesses that are unable to rehire individuals or return to the same level of business activity at which such business was operating before February 15, 2020, because of COVID-19 restrictions.
Also, in another development, the Chairman and Ranking Member of the Senate Committee on Small Business and Entrepreneurship co-signed a letter to Treasury Secretary Mnuchin and Small Businesses Administrator Carranza requesting that data on PPP recipients should be made public. On Monday, July 6, the SBA released a list of recipients of PPP loans more than $150,000, including the range of loan funding received by each.
More about Morrison & Foerster’s Israel Practice:
For more than four decades, Morrison & Foerster has been at the forefront of the Israeli market, representing numerous Israeli companies globally, at every stage of their evolution, as well as the foreign investors and investment banks that finance those companies. Our Israel Practice takes advantage of the firm’s global platform to fit the needs of virtually any client. We believe that this deep insight, as well as our historic commitment to Israel, has contributed to our long and successful track record with Israeli clients.