ICANN rejects private equity purchase of .org

The Internet Corporation for Assigned Names and Numbers (ICANN) this weekend announced that it has voted down the proposed change of control and entity conversion request submitted to it by the Public Interest Registry (PIR).

ICANN, a not-for-profit corporation dedicated to ensuring the secure and stable operation of the internet’s unique identifier systems, noted in its final decision that withholding consent of the transfer of PIR from the Internet Society (ISOC) to Ethos Capital is reasonable, and the public interest is better served in withholding consent as a result of various factors that create unacceptable uncertainty over the future of .org, the third largest generic top-level domain (gTLD) registry.

ICANN also noted that the factors that were considered in determining reasonableness include PIR being left with a $360 million debt as a result of the purchase that could disrupt its operation in the future by forcing it to service that debt and provide returns to its shareholders, which raises a further question about how the .org registrants will be protected or will benefit from this conversion. 

On November 13, 2019, PIR announced that ISOC, its parent organization, had reached an agreement with Ethos Capital, under which Ethos Capital would acquire PIR and all of its assets from ISOC. Under the agreement, PIR would also be converted from a Pennsylvania not-for-profit corporation to a for-profit Pennsylvania limited liability company. ISOC created and agreed to the transaction details that are under review.

A day later on Nov. 14, PIR formally submitted to ICANN a “Notice of Indirect Change of Control and Entity Conversion” in advance of closing the proposed transaction between Ethos Capital and ISOC. Since 2003, PIR has operated the .org as a not-for-profit organization, as well as six other gTLDs. Per the gTLD Registry Agreements, ICANN must either approve or withhold consent of a proposed change of control, the deadline for which May 4, 2020.

ICANN’s board was presented with a complex situation – impacting one of the largest registries with more than 10.5 million domain names registered. The corporation’s role has been to evaluate the reasonableness of PIR’s request for indirect change of control and entity conversion. 

In doing so, ICANN says it evaluated an extensive amount and variety of information related to the proposed transaction, including details of the transaction structure, financing, and other funding sources of Ethos Capital, the parties involved and more.