Form 4: Lightspeed Reclassifies Netskope Shares Pre-IPO

Lightspeed Venture Partners entities reported the reclassification of Netskope common stock into Class B shares and conversion of preferred stock ahead of the company's initial public offering.

Summary

• Lightspeed Venture Partners entities, including Lightspeed Venture Partners IX, L.P., Lightspeed General Partner IX, L.P., Lightspeed Ultimate General Partner IX, Ltd., Lightspeed Venture Partners XII, L.P., Lightspeed General Partner XII, L.P., and Lightspeed Ultimate General Partner XII, Ltd., filed a Form 4 regarding their beneficial ownership in Netskope Inc.
• The filing details a reclassification of Netskope's Common Stock into Class B Common Stock, effective immediately prior to the company's initial public offering (IPO).
• Various series of Convertible Preferred Stock (Series B, C, D, E, F, G, H) held by Lightspeed entities were converted into Common Stock on a one-to-one basis prior to the IPO.
• The total number of Common Stock acquired through conversion and then reclassified into Class B Common Stock by Lightspeed entities amounts to 64,273,632 shares across multiple Lightspeed funds.
• The Class B Common Stock is convertible into Class A Common Stock at the holder's option and will automatically convert on a 1:1 basis on or prior to September 19, 2035.
• This report is the first of three related Form 4 filings by Lightspeed-affiliated entities concerning the same transaction.

Sentiment

Score: 6

Explanation: The filing reports a standard corporate restructuring (reclassification and preferred stock conversion) in anticipation of an IPO. While not directly positive or negative in terms of operational performance, it signifies progress towards a significant corporate milestone (IPO), which is generally viewed favorably for a private company. The transactions themselves are procedural.

Positives

• The reclassification and conversion of preferred stock are standard procedures preceding an Initial Public Offering (IPO), indicating progress towards a public listing for Netskope Inc.
• The conversion of preferred stock into common stock simplifies the capital structure for public trading.

Negatives

• No specific negative financial or operational information is contained within this transactional filing.

Risks

• The filing does not explicitly mention operational or financial risks for Netskope Inc.

Future Outlook

The Class B Common Stock held by Lightspeed entities is convertible into Class A Common Stock at the holder's option and will automatically convert on a one-to-one basis on or prior to September 19, 2035, as stipulated in Netskope's amended and restated certificate of incorporation.

Management Comments

• Each of Lightspeed GP IX, Lightspeed UGP IX and Messrs. Eggers, Mhatre and Nieh disclaims beneficial ownership of these shares except to the extent of its or his respective pecuniary interest therein.
• This report is the first of three reports, each on a separate Form 4, but relating to the same transaction being filed by entities affiliated with Lightspeed Venture Partners and their applicable related parties.

Industry Context

This reclassification and preferred stock conversion is a typical corporate restructuring event that venture-backed companies undertake in preparation for or concurrent with an Initial Public Offering (IPO). It streamlines the capital structure, often creating different classes of common stock (e.g., Class A and Class B) to maintain voting control for early investors or founders post-IPO, a common practice in the technology sector.

Comparison to Industry Standards

• The conversion of preferred stock to common stock prior to an IPO is a standard practice for venture-backed companies, such as those seen with Snowflake (SNOW) or Palantir (PLTR) during their public listings, to simplify the equity structure for public investors.
• The creation of dual-class stock structures, like Class A and Class B Common Stock, is also a common mechanism, particularly among technology companies like Google (GOOGL) or Meta Platforms (META), to allow founders and early investors to retain significant voting control after going public.

Corporate Governance

Related Party Transactions

• Lightspeed Venture Partners entities, as 10% owners and with directors on the Issuer's board (e.g., Arif Janmohamed), are considered related parties. The reported transactions (reclassification and conversion of their holdings) are internal structural changes related to their investment in Netskope Inc.

Stakeholder Impact

• **Shareholders**: Existing shareholders will see their Common Stock reclassified into Class B Common Stock, and preferred shareholders will have their shares converted into Common Stock, then reclassified. This impacts the class of shares they hold and their associated rights (e.g., voting, conversion options).
• **Future Public Investors**: The IPO will introduce Class A Common Stock to the public, while Class B Common Stock, primarily held by insiders like Lightspeed, will have different characteristics (e.g., potentially higher voting rights per share, but convertible to Class A).

Next Steps

• Completion of Netskope Inc.'s Initial Public Offering (IPO).
• Filing of additional Form 4 reports by Lightspeed-affiliated entities related to this same transaction.
• Automatic conversion of Class B Common Stock to Class A Common Stock on or prior to September 19, 2035.

Key Dates

Keywords

Netskope Inc, NTSK, Lightspeed Venture Partners, SEC Form 4, Beneficial Ownership, Stock Reclassification, Preferred Stock Conversion, Initial Public Offering, IPO, Class B Common Stock, Venture Capital