One Power Co. CEO and Founder Jereme Kent is so confident in his company’s IPO that he’s made a unique pledge: The stock needs to perform or he loses half of his holdings.
The Findlay, Ohio-based industrial power company this week filed an IPO prospectus for a listing on the New York Stock Exchange. A price range hasn’t yet been set and it’s unclear when the listing will take place.
Deep inside the prospectus (on page 140) is a “Founder Alignment Agreement” which includes a few rules around Mr. Kent’s shares. One is a so-called lockup. Normally, lockup periods are only around 180 days but Mr. Kent is not allowed to sell for three years.
The real surprise is his pledge to forfeit half of his stock if it doesn’t hit a specific performance threshold. Under the agreement, the stock must rise 20% and stay above that level for 20 trading days within any 30 consecutive trading day period. If the stock fails to do so, Mr. Kent must forfeit half his holdings after three years.
Attorneys not involved in the deal told IPO Edge said the structure is unusual if not unique. While executives frequently have vesting schedules, the idea of forfeiting shares Mr. Kent already owns marks a big difference.
More broadly, the idea of “alignment” usually relates to senior management simply owning a significant amount of stock. The idea is to see CEOs rewarded in accordance with stock performance – which of course is the most important way most shareholders potentially benefit.
A search in Alpha Sense showed several mentions of alignment shares in other filings, but none of them looks quite like the One Power agreement.
The unusual structure comes after many CEOs were slammed for overly-generous compensation packages in the last IPO boom. SPACs in particular took heat for awarding a large number of promote shares to executives. Over time, various creative structures were designed to mitigate such concerns.
One Power has worked with large industrial clients such as Whirlpool Corp., Marathon Petroleum Corp., Holcim AG, Ball Corp., and Martin Marietta. Over the next 20 years, One Power has $1,448,000,000 in contracted payments remaining – an estimate of the undiscounted payments expected from industrial power projects that have contracted payment streams.
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