Is the issuance of a lower voting stock in connection with an exchange offer a violation of NASDAQs Voting Rights Rule?
Generally, the issuance of stock with disparate voting rights pursuant to an exchange offer is presumed to be prohibited under this Rule. These recapitalizations are typically structured to provide a one-time opportunity to receive lower-voting stock in exchange for shares of the existing class of common stock. For example, a company will issue a new class of lower voting stock with a higher dividend, and make the existing voting stock convertible into the lower voting, high dividend stock. Shareholders then face the choice of surrendering their voting control and receiving a small economic benefit (the dividend sweetener), or bypassing the exchange offer and maintaining the greater voting rights. The exchange offer is considered coercive because it forces shareholders into a decision to disenfranchise themselves given the prospect that they will be left with neither the increased dividend nor a meaningful vote if they decide not to participate in the exchange offer. Accordingly, such
