GM Warns of Anti-Takeover Provisions, But Are They a Risk?

General Motors today filed its SEC Form S-1 for its Initial Public Offering (IPO) (here). The Wall Street Journal has already noted a couple "surprising" risk factors listed in the filing (article here).

I was hardly surprised by the listing of company anti-takeover provisions as one of the "Risks Relating to this Offering and Ownership of Our Common Stock," although there are times when I have to wonder how real a risk this is.

First, this is more and more a risk of investing in any public company. Publicly traded companies commonly have anti-takeover provisions, and they are often strong takeover provisions. (See, e.g.,Lucian Arye Bebchuk, WHY FIRMS ADOPT ANTITAKEOVER ARRANGEMENTS, here) Second, it's not clear that such provisions are a problem. There is at least some evidence that such provisions support long-term value creation and do not facilitate major managerial entrenchment in the way that might be expected. (See, e.g., here.)

Ultimately, I suppose it's best to list them as possible risk factors, but I have to wonder if anyone will really consider such provisions when determining whether to participate in the IPO. In case you are curious, here are the provisions:

Anti-takeover provisions contained in our organizational documents and Delaware law could delay or prevent a takeover attempt or change in control of our company, which could adversely affect the price of our common stock.

Our amended and restated certificate of incorporation, as amended (Certificate of Incorporation), our amended and restated bylaws, as amended (Bylaws), and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our Board of Directors. Our organizational documents include provisions:

--Authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;

--Limiting the liability of, and providing indemnification to, our directors and officers;

--Limiting the ability of our stockholders to call and bring business before special meetings;

--Prohibiting our stockholders, after the completion of this offering, from taking action by written consent in lieu of a meeting except where such consent is signed by the holders of all shares of stock of the Company then outstanding and entitled to vote; 26 Table of Contents

--Requiring, after the completion of this offering, advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nomination of candidates for election to our Board of Directors; and

--Limiting, after the completion of this offering, the determination of the number of directors on our Board of Directors and the filling of vacancies or newly created seats on the board to our Board of Directors then in office.

These provisions, alone or together, could delay hostile takeovers and changes in control of the Company or changes in management.

--Joshua Fershee