<0> Hyperion Therapeutics IPO Criticized for Poor Corporate Governance by UNITEHERE </0>
<0> UNITEHERECourtney Alexander, 631-834-4681 or 415-722-4518Research Department </0>
UNITEHERE Research criticized Hyperion Therapeutics (NASDAQ: HPTX), which is undertaking an initial public offering, for weak corporate governance and a plethora of anti-takeover provisions which could disadvantage new investors.
Hyperion discloses a number of anti-takeover measures, including staggered election of directors, authorization to issue "blank check" preferred shares, supermajority voting requirements on critical matters, and provisions limiting removal of directors by shareholders, which may not be in the best interest of public investors who participate in the IPO.
The company states:
"Provisions in our restated certificate of incorporation and our bylaws that will become effective following the closing of this offering, as well as provisions of the Delaware General Corporation Law, or DGCL, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders, including transactions in which stockholders might otherwise receive a premium for their shares."
Small cap biotech companies whose shares are publicly traded have a mixed record of returns for public investors. An analysis of data available on Yahoo Finance for more than 200 publicly traded biotech and pharmaceutical companies with market caps lower than $1 billion shows the following:
Hyperion's Board of Directors will make critical decisions concerning follow-on share offerings, financing agreements, and potential mergers and business combinations, which can affect the value of shares after the offering date. However, the company's board may be insulated from public investors by provisions requiring the appointment of new board members to be approved by the Board itself, in addition to the measures outlined above.
Moreover, five of Hyperion's eight board members are appointed pursuant to agreements with entities which are preferred shareholders and/or lenders of the company, whose interests may be different from new public investors.
New investors may want to consider Hyperion's corporate governance framework as an important risk factor beyond the product-related risks associated with the company's business plan. Hyperion is in a position to mitigate its corporate governance risks before the offering is consummated by removing entrenching provisions.