PROS Holdings, Inc. (NYSE: PRO) (the "Company”) today announced the pricing of its previously announced private offering of $150.0 million aggregate principal amount of convertible senior notes due 2027 (the "Convertible Notes”). The Convertible Notes are being offered in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act”).
The Convertible Notes will be unsecured, unsubordinated obligations of the Company and will pay interest semiannually at an annual rate of 2.250% and will be convertible into cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, based on the applicable conversion rate at such time. The Convertible Notes have an initial conversion rate of 23.9137 shares of the Company’s common stock per $1,000 principal amount of Convertible Notes (which is equivalent to an initial conversion price of approximately $41.82 per share of the Company’s common stock), representing an initial conversion premium of approximately 32.5% above the closing price of $31.56 per share of the Company’s common stock on September 10, 2020. The conversion rate is subject to adjustment in certain circumstances, including in connection with specified fundamental changes. Holders of the Convertible Notes will have the right to require the Company to repurchase all or a portion of their notes upon the occurrence of a fundamental change (as defined in the indenture governing the Convertible Notes) at a purchase price of 100% of their principal amount plus any accrued and unpaid interest. The Convertible Notes will mature on September 15, 2027, unless converted, redeemed or repurchased in accordance with their terms prior to such date. Prior to June 15, 2027, the Convertible Notes will be convertible only upon the satisfaction of certain conditions and during certain periods, and thereafter, at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date regardless of these conditions. The Company expects to close the offering on or about September 15, 2020, subject to the satisfaction of various customary closing conditions.
In connection with the offering, the Company entered into privately negotiated capped call transactions with certain option counterparties. The capped call transactions cover, subject to anti-dilution adjustments, the number of shares of common stock underlying the Convertible Notes sold in the offering. The capped call transactions are generally expected to reduce potential dilution to the Company’s common stock upon conversion of the Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted notes, as the case may be.
The Company estimates that it will receive net proceeds from the offering of approximately $145.9 million, after deducting the initial purchasers’ discount and estimated offering expenses. The Company intends to use $25.3 million of the net proceeds of the offering to pay the cost of the capped call transactions. The Company intends to use the remainder of the net proceeds from the offering for general corporate purposes, including working capital, capital expenditures, potential acquisitions and strategic transactions.
This press release is neither an offer to sell nor a solicitation of an offer to buy the Convertible Notes or the shares of common stock issuable upon conversion of the Convertible Notes, if any, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or jurisdiction.
The Convertible Notes and the shares of common stock issuable upon conversion of the Convertible Notes, if any, have not been registered under the Securities Act, or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
This press release contains "forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the planned offering, business strategies, market potential, future financial and operational performance and other matters. Words such as "anticipates,” "estimates,” "expects,” "projects,” "forecasts,” "intends,” "plans,” "will,” "believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs about future events and are inherently susceptible to uncertainty and changes in circumstances. Except as required by law, the Company is under no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise. With respect to the planned offering, such uncertainties and circumstances include whether the Company will consummate the offering on the anticipated terms of the notes, if at all, and the use of the net proceeds from the offering; and whether the capped call transactions will become effective. Various factors could also adversely affect the Company’s operations, business or financial results in the future and cause the Company’s actual results to differ materially from those contained in the forward-looking statements, including those factors discussed in detail in the "Risk Factors” sections contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the "Annual Report”) and Quarterly Reports on Form 10-Q for the three month period ended March 31, 2020 and the three and six month periods ended June 30, 2020 (the "Quarterly Reports”), filed with the Securities and Exchange Commission. In addition, the Company operates in a highly competitive, rapidly changing and technology-driven industry. This industry is affected by government regulation, economic, strategic, political and social conditions, technological developments and, particularly in view of new technologies, the continued ability to protect intellectual property rights. The Company’s actual results could differ materially from management’s expectations because of changes in such factors. Achieving the Company’s business and financial objectives, including improved financial results and maintenance of a strong balance sheet and liquidity position, could be adversely affected by the factors discussed or referenced under the "Risk Factors” sections contained in the Annual Report and Quarterly Reports as well as, among other things: (1) changes in the Company’s plans, strategies and initiatives; (2) the impacts of the global COVID-19 pandemic on the Company’s business, customers, partners, employees, markets, financial results and condition; (3) stock price volatility; (4) future borrowing and restrictive covenants under the revolving credit facility; (5) the impact of acquisitions, dispositions and other similar transactions; (6) the Company’s ability to attract and retain key employees; and (7) the Company’s ability to attract and retain new and existing customers to its solutions.
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Brendan McDermid/ReutersGoldman Sachs Board of Directors announced Thursday that the CEO, CFO, COO, and CEO of Goldman Sachs International will collectively have their 2020 pay reduced by $31 million in light of a Malaysian bribery scandal.
If that $31 million is split evenly amongst the execs, that's under $8 million per person. Last year, the top five highest paid executives at Goldman Sachs earned an average of $17 million in total reported compensation.
Former employees and executives, including former CEO Lloyd Blankfein, will also have to pay back a collective total of $67 million, according to the press release.
In each of current CEO David Solomon and former CEO Lloyd Blankfein's most recent three years at Goldman Sachs, they each earned a sum of more than $60 million total in total reported compensation.
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Goldman Sachs has been under investigation for close to a decade over its role in Malaysia's 1MDB corruption scandal. That ended on Thursday, when US Justice Department and regulators announced a $2.9 billion settlement and the bank admitted it broke US corruption laws.
Goldman's board also said it would take back or cut pay for former and existing execs at the prestigious Wall Street bank.
Goldman's announcement includes what is called a "clawback" in which executives, former executives, and former employees will give back some of their former compensation, according to the statement. The forfeitures, clawbacks, and reductions in compensation will amount to $174 million in total.
Federal prosecutors in 2017 filed criminal charges against Roger Ng and Tim Leissner, two former Goldman employees, of taking part in facilitating the theft of $2.6 billion from 1MDB, after Goldman had assisted the fund in raising more than $6 billion in 2012 and 2013. Leissner has pleaded guilty and is awaiting sentencing, while Ng has maintained his innocence and is awaiting trial.
The recoupment of employee pay, or "clawbacks," are a mechanism that allows firms to take money back from employees in the case of misconduct.
US federal law currently only covers misconduct by CEOs and CFOs, so Goldman's clawback in this case is self-imposed. Like many public companies today, Goldman Sachs has broader internal clawback policies that cover compensation recovery from a broader group of employees.
Goldman's statement noted that "while none of the past or current members of senior management were involved in or aware of the Firm's participation in any illicit activity at the time the Firm arranged the bond transactions, the Board has determined that it is appropriate in light of the findings of the government and regulatory investigations and the magnitude of the total 1MDB settlement that compensation for certain past and current members of senior management be impacted."
In light of the recoupment of pay, the money the executives are giving back still only represents a fraction of what they've earned as employees of Goldman Sachs.
The clawbacks cover many Goldman Sachs employees and former employees
A "clawback" is when a firm takes back money from employees in light of restatements on earnings or misconduct. Most firms today, including Goldman Sachs, have clawback policies written into compensation plans or employment agreements. Goldman in 2019 said it would look to cut pay and claw back money from current and former senior management.
The firm is seeking $76 million total from former employees Tim Leissner, Ng Chong Hwa, and Andrea Vella, all listed by the firm as individuals "implicated in the criminal scheme." Vella has not been charged but was permanently banned from the industry by the Federal Reserve.
Former executives, including the former Chief Executive Officer, Lloyd Blankfein, the former Chief Operating Officer, Gary Cohn, a former Chief Financial Officer, David Viniar, the former Vice Chairman who was a CEO of Goldman Sachs International Michael Sherwood and the former Vice Chairman who was the Global Head of Growth Markets Michael Evans will together forfeit outstanding long-term equity awards from a 2011 grant, in amounts totalling $67 million.
Finally, the board statement said that current executive officers, named as CEO David Solomon, CFO Stephen Scherr, COO John Waldron, and CEO of Goldman Sachs International Richard Gnodde, will have their overall compensation reduced by $31 million for 2020.
Goldman Sachs' clawback policy
Goldman Sachs adopted a clawback policy in 2015, allowing the bank to recover compensation from the executive leadership team that "mitigates imprudent risk-taking, including that misconduct or improper risk analysis."
Current laws from the Sarbanes-Oxley Act in 2002 don't require clawback policies at firms, but allow companies to recoup compensation paid to the CEO and CFO if the company had to restate earnings or if there was misconduct.
However, according to Steve Seelig, senior regulatory advisor at Willis Towers Watson, "shareholder advisory firms [insist] that companies have their own enforcement mechanism, so that corporate clawbacks for fraud [are] enforced by companies," so many companies have clawback policies in place.
Goldman Sachs' full proxy disclosure surrounding clawbacks is below. :
"Our Compensation Committee adopted a comprehensive, standalone clawback policy in January 2015 that applies to each member of our Executive Leadership Team and generally permits recovery of awards (including equity-based awards and underlying Shares at Risk).
Among other things, the Clawback Policy expands our Recapture rights if the events covered by The Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) occur, applying such provision to all variable compensation (whether cash- or equity-based) paid to any member of our Executive Leadership Team, even though the Sarbanes-Oxley provision on which it is based requires that such a clawback apply only to our CEO and CFO."
The compensation and share ownership of Goldman Sach's CEO and former CEO, David Solomon and Lloyd Blankfein
The executives, both current and former, will be losing a lot of money. That's what clawback policies are meant to do — recoup payment that shouldn't have been awarded to executives in the first place.
But for firms like Goldman Sachs, a few million dollars represents a fraction of what executives are earning annually. Let's look at both the current and former CEO, David Solomon and Lloyd Blankfein.
From 2017 to 2019, current Goldman Sachs CEO David Solomon earned a sum of total reported compensation equaling $61.7 million. Aside from this, Solomon owns 163,754 shares of Goldman Sach's stock, worth a total of $33.6 million as of Thursday's close price. That's almost $100 million over the past three years. None of this money is being recouped, as the settlement only impacts Solomon's 2020 compensation.
In his last three years at Goldman Sachs, 2016-2018, former CEO Lloyd Blankfein earned a sum of total reported compensation equaling $65.6 million. As of March 4, 2019, Blankfein also held 2,393,130 shares of Goldman Sachs stock. It's unclear how many shares Blankfein holds today, as Goldman Sachs' beneficial ownership disclosure only includes the ownership of current directors and named executive officers. But the value of 2,393,130 as of Thursday's close price would have been nearly $492 million.
The chart below shows the compensation for Solomon and Blankfein over the most recent four years. Note that, in 2017, Solomon was a co-COO. In 2019, Blankfein no longer was employed by Goldman Sachs.
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