Thoughts and Prayers to Mimi Alemayehou.
Alemayehou, like the 11 other members of the Twitter board of directors, is the Elon Musk hostile takeover circus. It was an even more stressful role when the richest man in the world set his eyes on the company.
But Alemayehou’s position is uniquely tricky. She is also the only member of the “Special Litigation Committee” to investigate and make a decision last year on the Twitter board of its largest shareholder dust-up, the 2020 settlement with activist hedge fund Elliott Management.
As the FT has reported, a shareholder lawsuit targeting the outcome of the situation last September survived a motion to dismiss the Delaware Court of Chancery. The plaintiff, The Orlando Police Pension Fund. The private equity firm of Silver Lake is selling unnecessarily selling $ 1bn worth of convertible bonds.
In recent weeks – even as the Musk drama was unfolding – Alemayehou has been busy. The Delaware court has asked the SLC to extend an existing six-month stay in the lawsuit expiring another four months so that its investigation may continue without distraction. However, the Florida pension plan is a pressing and demanding move to move forward with discovery and depositions.
In its investigation, the SLC has already made a record of its 44,000 documents, hoped to interview 15 witnesses and has already served information on Twitter management and directors, as well as likes of Goldman Sachs, Elliott, Allen & Co. and Joele Frank.
This is all very awkward. Nearly all the directors from the 2020 kerfuffle remain on Twitter’s board. Goldman Sachs, Silver Lake and Elliott are key players in the current Musk drama.
In other words, while the most sensational hostile M&A bid in recent memory has been out publicly, the legal fight is far more alive and could have a bigger impact on the current Twitter board. prematurely caving to a hostile party.
In March 2020, Twitter announced its settlement with Elliott, which included adding Elliott’s Jesse Cohn to the board along with Silver Lake’s Egon Durban. Silver Lake also purchased a $ 1bn convertible bond on Twitter, which was a $ 2bn share buyback plan. After just a couple weeks in the deal, Elliott approached Twitter saying it was ready to submit to director nominations and maybe even to try oust Jack Dorsey as CEO.
According to court papers, the Orlando Police Pension Fund wonders why those issues are needed in Silver Lake Stepping, and how it all happened so quickly. The pension fund was allowed by Delaware Law to make a “books-and-record” request, and in return the board materials were prepared by Goldman Sachs and the communications firm Joele Frank. who were hired to defend Twitter against Elliott.
Goldman and Joele Frank had scared the daylights out of the board. Elliott was one of the fiercest activist investors in the world and one of the most famous companies in the world.
Thomas Curry, the pension fund’s lawyer, explained to the judge in the 2021 court hearing on the Twitter board that he has been asked:
“Are you going to go to war or are you going to war? And, of course, if you go to war, you’re going to war with Elliott. . . This is, I think, fair to say, probably the most well-resourced, most successful, and, by the way, the most active activist investor in the world. . . The next couple of months, and it’s going to be pretty intense. And your advisor is telling you, if it happens, you’re going to lose. This is a very high-profile proxy contest in a losing party. . . I think they should at least be unceremoniously ousted in a high-profile proxy contest that has position and have read about it every day Wall Street Journal and watch it every day CNBC This is like, you know, if you don’t play your cards right here, you’re going to end up in a losing character like a Jim Stewart book on every – every airport bookstore in the world. ”
As for the Silver Lake Convertible, the plaintiff presented evidence that it was the case that the terms were too rich:
The plaintiff’s theory on why it was a sweetheart deal is also juicy. The Goldman Sachs executive leading its Twitter team was their longtime star investment banker Gregg Lemkau. Lemkau had a long relationship with Silver Lake and its leader Egon Durban, most notably on several transactions involving Dell. Elliott and Silver Lake have been owned by frenemies themselves, including the former at Dell. Goldman and Lemkau had also worked with Elon Musk and the Lake Testimonial to take on the ill-fated 2018 effort on Silver Lake.
(In 2020 Lemkau departed Goldman to lead Michael Dell’s private investment firm. Dell, Lemkau and Durban all have homes near Hawaii.)
Tom Curry, The Plaintiff’s Lawyer, Again From His Theory of Last Year’s Court Hearing:
“It’s those two guys [Lemkau and Durban] In this heated two-week period where things are not as good as they used to be, they often have a process that drags out over months – these two guys are friends, and so are you. So I think the relevance here is that these directors, in fact, are agreeing to this investment agreement.
The Orlando Police Pension Fund is not named by Goldman Sachs or Silver Lake Defendants, but it is for the purposes of discovery and access to additional documents. Depending on what it finds, the plaintiff has said that Goldman could face an allegation of aiding and abetting the board’s breach of fiduciary duty, and Silver Lake’s “unjust enrichment”.
Twitter’s CFO Ned Siegel, who said at a Bank of America conference that the convertible bond proceeds were superfluous:
“We’ve probably had a year away from announcing our first repurchase, taking another $ 1 billion that we’ve had to use the terms of the business.”
Of course, Goldman Sachs, Silver Lake and Elliott are all big players in the current Elon drama. Goldman is again advising the board (and it also has a longstanding relationship with Tesla). Egon Durban of Silver Lake remains on the Twitter board, and at the Elon buyout price of $ 54.20, the convertible bond will buy it for more than $ 300mn. Jesse Cohn resigned the Elliott seat from the board last year, but Elliott still owns 1.3 per cent of Twitter and could be a financing partner for the Elon bid.
The Orlando Pension’s lawsuit is a so-called “derivative” claim – not harmful to direct shareholders but rather to Twitter and the corporation. Such derivative claims are often sought after by the board of the province. However, shareholders like the Orlando pension plan can make a claim of “demand futility” to the court, arguing that the board is too conflicted to investigate wrongdoing. If the judge agrees, shareholders can press the derivative matter themselves.
Advocates for the Twitter board described the allegations as “speculation” and reject the idea that directors would ever be motivated to breach their duties simply to hold on to their jobs. In addition, they argue that the Silver Lake convertible bond is highly negotiated and the terms are comparable with the line.
Vice-Chancellor Travis Laster of the Delaware Court of Chancery, however, found that the pension fund’s narrative compelling enough to move the case to a fact-finding phase, in a September court hearing:
“[I]t’s a story that makes sense. It’s a story that’s supported by contemporaneous documents. It’s a story supported by objective evidence of how the board acted, both in terms of the 220 documents [Goldman Sachs and Joele Frank board materials] and also the outcome of the terms. ”
All this bring us back to Mimi Alemayehou. In September, the plaintiff’s claims to the Special Litigation Committee were investigated by the Twitter board. Since she joined the board in 2021, well after the Elliott settlement, she was a natural choice.
The Directors defenders Jack Dorsey, Martha Lane Fox, Omid Kordestani, Patrick Pichette, David Rosenblatt, Brett Taylor and Robert Zoellick remain on the board today. Just one director defendant, Ngozi Okonjo-Iweala, is no longer on the board. But She May Be Alemayehou For A Future Problem.
The Orlando Pension Fund has uncovered tweets – what else – From Alemayehou That It Shows A Pre-Existing Favorable Impression Of Okonjo-Iweala, Investigating With She Is Now Tasked. According to the pension’s court papers, Alemayehou had in 2020 and 2021 actively campaigned for Okonjo-Iweala to be the Director-General of the World Trade Organization. Recent court papers in The Pension wrote:
“Alemayehou has a long history of being a highly vocal public supporter of Okonjo-Iweala’s political ambitions and has co-authored materials with both Okonjo-Iweala and her son.”
The current stay expires on May 9, so expect a ruling from Laster before the extension.
The Orlando Police Pension for Lawyers declined to comment. The Twitter Board for Lawyers declined to comment. Comment to Silver Lake Declined. Lawyers for the Twitter SLC and Goldman Sachs did not immediately respond to a request for comment.
The plaintiff’s case of the central thrust is that a Twitter directorship is so prestigious that the board members acted improperly to save their roles. However, between the lawsuit, the Musk takeover over the current Musk fireworks and the potential future litigation, it may not seem so hot at all.
Complaint, Orlando Police Pension Fund v. Twitter Board of Directors
Defendant’s Motion to Dismiss on the Court of Transcript, Oral Argument and Rulings, 9/10/21
Motion to Extend Stay by the Twitter SLC
Plaintiff’s Response to Opposition to the SLC’s Motion to Extend the Stay