David Morken, the chair and CEO of Bandwidth which he helped launch in 1999, could become a very wealthy man if the communications provider pulls off an initial public offering and later sells the company, which he will control post-IPO.

The Raleigh-based firm disclosed plans for an $85 million initial public offering of stock on Friday. Its stock will be listed on the Nasdaq under the symbol “band” if the IPO is successful.

The IPO moves comes just 10 month after Bandwidth spun out its consumer-focused Republic Wireless last December. Morken also serves as chair at that firm.

Bandwidth won’t talk about the IPO filing.

“We can’t comment on anything at this time, but when we can, we’ll definitely let you know,” spokesperson Noreen Allen told WRAL TechWire.

Morken in control

However, the IPO filing makes clear that Morken will remain in control of Bandwidth through the structuring of its stock offering.

“Following the IPO-Related Reorganization, we expect that Morken will control a majority of our outstanding voting power and we will be a ‘controlled company’ under the corporate governance rules of the Nasdaq Global Select Market,” the filing reads.

Here’s Nasdaq’s definition of “controlled company:”

“A Controlled Company is a Company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company.”

A lucrative exit

Morken also stands to gain an immediate lucrative benefit should the IPO deliver $35 million or more.

He will receive a cash bonus of $750,000 “upon the occurrence of our first firm commitment underwritten public offering resulting in gross proceeds of at least $35 million that occurs during the term of the employment agreement,” according to the filing.

Morken receives an annual salary of $375,000 plus bonuses. In 2016, according to the filing, Morken receive salary and bonuses and other compensation totalling more than $925,000.

Plus, he also has 135,000 stock options at $14.51 per share that expire in April 2022.

If Bandwidth is sold ….

If Morken were to decide to sell Bandwidth after the IPO, he stands to make even more money through what the company describes in the filing as a “Liquidity Bonus.”

But he won’t have a lot of time to make that decision. Bandwidth must be sold before Jan. 1, 2024, if Morken is to cash out with a nice bonus.

“Upon a liquidity event in which there is a change of control of our company with a value of at least $750 million (calculated on an enterprise basis) and the transaction commences during the term of the employment agreement and closes on or prior to December 31, 2023, Mr. Morken will additionally be entitled to receive a liquidity bonus …” the filing says.

If Bandwidth sells for between $750 million and $999,999,999, he receives $5 million.

The bonus escalates from there to $20 million should Bandwidth sell for $2 billion or more.

Here’s the breakdown:

Value Calculated on Enterprise Basis, Liquidity Bonus

  • $750,000,000—$999,999,999: $5,000,000
  • $1,000,000,000—$1,249,999,999: $10,000,000
  • $1,250,000,000—$1,499,999,999: $12,500,000
  • $1,500,000,000—$1,749,999,999: $15,000,000
  • $1,750,000,000—$1,999,999,999: $17,500,000
  • $2,000,000,000 or more: $20,000,000

Read the full filing at: