April 23, 2015
Blog I Meant to Write #2: Etsy IPO
Posted by Usha Rodrigues

I'm also a week late on the Etsy IPO, and I trolled around the likely law prof blogs to see if anyone else had beat me to the punch (if I missed someone, please let me know and I'll update accordingly). 

Etsy IPO'd last Thursday, pricing at $16 and opening at $30, raising $267 million.  According the WSJ Blog, that's the most ever for a NY-based VC-backed  firm.

But for my money the more interesting take came from the NYT, since it concerned organizational formEtsy is a B-Corp-- but not a benefit corp.  Here's Haskell Murray on the difference. Bottom line, a B-Corp is a certification thing, and you can be a for-profit B-Corp.  A benefit corporation is a whole separate kind of entity, one organized not just for profit. 

Here's the NYT on the importance of the B-Corp designation to Etsy:

Etsy declares in its public offering prospectus that it wants to change the decades-old conventional retail model of valuing profits over community. It states that its reputation depends on maintaining its B Corp status by continuing to offer employees stock options and paid time for volunteering, paying all part-time and temporary workers 40 percent above local living wages, teaching local women and minorities programming skills, and composting its food waste.

But wait, there's more. To maintain its B-Corp status, Etsy must reincorporate as a benefit corporation in a few years.  B Lab's website says "companies must elect benefit corporation status within four years of the first effective date of the legislation or two years of initial certification, whichever is later."  The NYT suggests a slightly longer glide-path: "B Lab is giving companies four years from the date any relevant state legislation is passed to comply with the state law or risk losing B Corp certification. Since Delaware passed that law in August 2013, Etsy has until 2017 to become a benefit corporation."  Yet Etsy CEO Chad Dickerson is quoted as saying Etsy had no plans to reincorporate as a benefit corporation: “Regardless of certification, we plan to focus on delivering a strong business that also generates social good,” he said." 

It will interesting to see how a publicly traded corporation like Etsy weighs the benefits of B-Corp certification against the risks and costs of moving to benefit corporation status.  Risks like opening yourself up to 10b-5 and derivative shareholder suits if you fail to fulfill whatever social purpose you articulate in your articles of incorporation. Not to mention the securities law issues around stressing the importance of B-Corp status while seeming to suggest that it will lose that status in a few years. 

Update: Thanks to Stefan Padfield for this from Race to the Bottom's J. Robert Brown Jr

Update 2: I knew Haskell Murray must have been on this, but I didn't look back far enough to see this post.

IPOs, Securities, Social Entrepreneurship | Bookmark

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