The 80s called—they want their shoulder pads, synth-pop, moon-walks and, apparently, their blanket prohibition on midstream recapitalizations back. For more than three decades, a doctrinal relic from the leveraged-buyout fever of that era has quietly blocked shareholders from rearranging their capital structure midstream, even when those deals are demonstrably fair and value-maximizing. Though a relic, the exchange rule banning dual-class recapitalizations is still biting.  Nasdaq has recently taken the position that the extension of a sunset on dual-class stock implicates (and possibly violates) the rule (while the NYSE has not commented publicly on Nasdaq’s position, its rule is largely identical to Nasdaq’s rule and presumably would be interpreted in the same way).   The consequence is that this 80s by-gone now conceivably stands in the way of a host of dual-class companies seeking to extend sunset provisions to the benefit of their shareholders. 

Back in the 1980s hostile takeovers were daily front-page news and corporate raiders like Carl Icahn, Victor Posner, and the Belzberg brothers struck terror into boardrooms. One particularly controversial defensive tactic was the “midstream recapitalization”: a controlling or incumbent block would propose a restructuring—often issuing high-vote or non-voting stock or exchanging existing shares on differential terms—that dramatically shifted voting power away from the public float and toward management or founders thereby defeating a hostile bid. In the most infamous cases (e.g., the 1987 Harcourt Brace Jovanovich recapitalization and the 1985 Multimedia recapitalization), minority holders faced a Hobson’s choice: tender into a coercive, hostile deal or be left holding highly illiquid, low-vote stubs.

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