Sec Form 13D Filing - Brem Monte M filing for StepStone Group Inc. (STEP) - 2020-09-21

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934*

StepStone Group Inc.

(Name of Issuer)

Class A Common Stock, Par Value $0.001 Per Share

(Title of Class of Securities)

85914M107

(CUSIP Number)

Jennifer Y. Ishiguro

Chief Legal Officer & Secretary

StepStone Group Inc.

450 Lexington Avenue, 31st Floor

New York, NY 10017

Telephone: (212) 351-6100

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

September 18, 2020

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box:  ☐

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 240.13d-7 for other parties to whom copies are to be sent.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

Item 1. Security and Issuer

This statement on Schedule 13D (this “Statement”) relates to the Reporting Persons’ (as defined in Item 2 below) beneficial ownership interest in the Class A common stock, par value $0.001 per share (the “Class A Common Stock”), of StepStone Group Inc., a Delaware corporation (the “Issuer”). The address of the principal executive offices of the Issuer is 450 Lexington Avenue, 31st Floor, New York, NY 10017.

Item 2. Identity and Background

This Schedule 13D is being filed pursuant to a joint filing agreement filed as Exhibit 1 hereto by Monte M. Brem, Scott W. Hart, Jason P. Ment, Jose A. Fernandez, Johnny D. Randel, Michael I. McCabe, Mark Maruszewski, Thomas Keck, Thomas Bradley, David Jeffrey and Darren Friedman. The foregoing persons are referred to collectively as the “Reporting Persons.” Each of the Reporting Persons is filing in his capacity as a member of the Class B Committee (as defined below). In addition, Messrs. Brem, Fernandez, McCabe, Maruszewski, Keck, Bradley and Jeffrey are filing as the direct owners of more than 5% of the Class B units (the “Class B Units”) of StepStone Group LP (the “Partnership”).

In connection with the closing of the Issuer’s initial public offering (the “IPO”) of the Issuer’s Class A Common Stock, the Issuer effected certain reorganization transactions (the “Reorganization”). The Issuer entered into an exchange agreement with the direct partners of the Partnership that entitled those partners (and certain permitted transferees thereof) to exchange their Class B Units in the Partnership together with an equal number of shares of the Issuer’s Class B common stock, par value $0.001 per share (the “Class B Common Stock”), for shares of Class A Common Stock on a one-for-one basis or, at the Issuer’s election, for cash.

Concurrently with the closing of the Issuer’s IPO and the Reorganization, certain of the Class B stockholders entered into a stockholders agreement (the “Stockholders Agreement”) with respect to all shares of Class A Common Stock and Class B Common Stock held by them. The Stockholders Agreement provides for the establishment of a Class B Committee selected from time to time by the parties to that agreement (the “Class B Committee”). The Reporting Persons constitute the initial members of the Class B Committee. Pursuant to the Stockholders Agreement, these Class B stockholders agree to vote all their shares of voting stock, including Class A Common Stock and Class B Common Stock, together and in accordance with the instructions of the Class B Committee on any matter submitted to the Issuer’s common stockholders for a vote. The Reporting Persons may be deemed to have beneficial ownership over 53,157,491 shares of voting stock held by stockholders party to the Stockholders Agreement.

The Issuer’s Class A Common Stock and Class B Common Stock vote together as a single class on substantially all matters submitted to our stockholders for approval. The Class A Common Stock carries one vote per share, and the Class B Common Stock currently carries five votes per share. The Issuer’s certificate of incorporation contemplates a “Sunset” becoming effective upon the earliest to occur of September 18, 2025 or one of a series of enumerated events or transactions involving certain Reporting Persons. After a Sunset becomes effective, the Class B Common Stock will carry one vote per share, and the Stockholders Agreement will terminate.

As of the date of this filing, the members of the Class B Committee collectively hold, directly or indirectly, approximately 62.2% of the aggregate voting power of the Class A Common Stock and Class B Common Stock, and the parties to the Stockholders Agreement (inclusive of the Class B Committee) collectively hold, directly or indirectly, approximately 74.0% of the aggregate voting power of the Class A Common Stock and Class B Common Stock. As a result of the arrangement set forth in the Stockholders Agreement, the Class B Committee are expected to control the outcome of matters submitted to the Issuer’s stockholders until a Sunset has occurred.

Each Reporting Person disclaims beneficial ownership of securities owned by the other Reporting Persons.

Item 3. Source and Amount of Funds or Other Consideration

At the closing of the IPO of the Issuer’s Class A Common Stock, the Issuer entered into an exchange agreement with the direct partners of the Partnership that entitled those partners (and certain permitted transferees thereof) to exchange their Class B Units in the Partnership together with an equal number of shares of the Issuer’s Class B Common Stock for shares of Class A Common Stock on a one-for-one basis or, at the Issuer’s election, for cash.

Item 4. Purpose of Transaction

The Reporting Persons acquired, and presently hold, Class B Common Stock and the Class B Units for investment purposes.

Each of the Reporting Persons have entered into lock-up agreements pursuant to which they have agreed that, prior to March 15, 2021, they will not, without the prior written consent of J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC, dispose of or hedge any of the Issuer’s Class A Common Stock (including securities convertible into or redeemable, exchangeable or exercisable for shares of Class A Common Stock, as well as any shares acquired pursuant to the Issuer’s directed share program), subject to specified exceptions.

Except as otherwise described in this Schedule 13D, none of the Reporting Persons currently has any plans or proposals that would result in or relate to any of the transactions or changes listed in Items 4(a) through 4(j) of Schedule 13D. However, as part of their ongoing evaluation of their investment and investment alternatives, the Reporting Persons may consider such matters and, subject to applicable law, may formulate a plan with respect to such matters or make formal proposals to the Board of Directors of the Issuer, other stockholders of the Issuer or other third parties regarding such matters. The Reporting Persons reserve the right to acquire additional securities of the Issuer in the open markets, in privately negotiated transactions (which may be with the Issuer or with third parties) or otherwise, to dispose of all or a portion of their holdings of securities of the Issuer or to change their intention with respect to any or all of the matters referred to in this Item 4. In addition, because certain of the Reporting Persons are members of the Board of Directors of the Issuer, such Reporting Persons may, from time to time, be involved in discussions which relate to one or more of the matters described in this Item 4. Each of the Reporting Persons who are members of the Board of Directors of the Issuer disclaims any obligation to report on any plans or proposals with respect to the matters described in this Item 4 that develop or occur as a result of any Reporting Person’s role as a director of the Issuer and participation in decisions regarding the Issuer’s actions.

Item 5. Interest in Securities of the Issuer

(a) and (b) The following table sets forth the aggregate number and percentage of the Class A Common Stock beneficially owned by each Reporting Person. The aggregate number and percentage of the Class A Common Stock beneficially owned by each Reporting Person is calculated in accordance with Rule 13d-3, but excluding any shares beneficial owned solely by virtue of the Stockholders Agreement.

Each of the Reporting Persons may be deemed to have beneficial ownership over 53,157,491 shares of voting stock held by Class B stockholders party to the Stockholders Agreement (inclusive of the shares listed in the table), representing 64.5% of Class A Common Stock outstanding (assuming that the 52,784,395 Class B Units subject to the Stockholders Agreement are exchanged), which has been omitted from the table below.

The percentages below are (i) based on 29,237,500 shares of Class A Common Stock outstanding after the IPO and (ii) assume that the Reporting Persons exchange all of the Class B Units held directly or indirectly by them but no other Reporting Person or party to the Stockholders Agreement exchanges their Class B Units.

(c) On September 18, 2020, the Issuer used a portion of the proceeds from the IPO to purchase shares of Class B Common Stock and Class B Units in the Partnership, including those indicated above, in the quantities set forth in the table above, at a price equivalent to $16.785 for one share of Class B Common Stock and one Class B Unit.

(d) Other than as described above, no other person is known to have the right to receive and the power to direct the receipt of dividends from, or the proceeds from the sale of, the Class A Common Stock beneficially owned by members of the group.

(e) Not applicable.

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer.

In connection with the closing of the IPO, the Issuer effectuated certain reorganization transactions pursuant to which existing partners of the Partnership, including certain of the Reporting Persons, obtained beneficial ownership of Class B Units in the Partnership together with an equal number of shares of the Issuer’s Class B Common Stock.

Pursuant to the Eighth Amended and Restated Limited Partnership Agreement of the Partnership, dated as of September 18, 2020 (the “Partnership Operating Agreement”) and the exchange agreement described above, the Reporting Persons may exchange their Class B Units for shares of Class A Common Stock on a one-for-one basis, or at the Issuer’s election, for cash, subject to timing and procedural requirements set forth therein. When a Class B Unit is exchanged for a share of Class A Common Stock, the corresponding share of the Issuer’s Class B Common Stock will be automatically redeemed and cancelled. When a Class B Unit is surrendered for exchange, it will not be available for reissuance by the Issuer.

The exchange agreement contains certain timing and volume limitations on exchanges of units held by the Issuer’s senior employees and certain large Class B stockholders, including the Reporting Persons: no exchanges will be permitted until after the first anniversary of the closing date of the IPO, and then exchanges may not exceed one-third of their original holdings prior to the second anniversary of the closing and two-thirds of their original holdings prior to the third anniversary. After the third anniversary of the closing date, these limitations expire. Under the exchange agreement, the Board of Directors of the Issuer may waive these limitations in its discretion.

Pursuant to a registration rights agreement entered into by and among the Issuer, certain large institutional Class A stockholders and certain Class B stockholders, at any time after the expiration of the lock-up period described below, such holders can require the Issuer to register for resale under the Securities Act of 1933, as amended, the shares of Class A Common Stock issued upon exchange of the Class B Units. The registration rights agreement also provides for customary piggyback rights.

Each of the Reporting Persons have entered into lock-up agreements pursuant to which they have agreed that, prior to March 15, 2021, they will not, without the prior written consent of J.P. Morgan Securities LLC, Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC, dispose of or hedge any of the Issuer’s Class A Common Stock (including securities convertible into or redeemable, exchangeable or exercisable for shares of Class A Common Stock, as well as any shares acquired pursuant to the Issuer’s directed share program), subject to specified exceptions.

The Issuer entered into a tax receivable agreement with certain continuing partners of the Partnership effective as of the closing of the IPO that provides for the payment by the Issuer to certain continuing partners of the Partnership of 85% of the amount of tax benefits, if any, that the Issuer actually realizes (or in some circumstances is deemed to realize) as a result of increases in tax basis (and certain other tax benefits) resulting from purchases or exchanges of partnership units in the Partnership.

In connection with the IPO, the Reporting Persons and other Class B stockholders entered into a stockholders agreement pursuant to which they agreed to vote all their shares of voting stock, including Class A Common Stock and Class B Common Stock, together and in accordance with the instructions of the Class B Committee on any matter submitted to the Issuer’s common stockholders for a vote. Under the stockholders agreement, the Reporting Persons have given an irrevocable proxy, coupled with an interest, to the Chair and Secretary of the Class B Committee to vote such Reporting Person’s shares of Class A and Class B Common Stock.

The foregoing summaries do not purport to be complete, and are qualified in their entirety by reference to the form of lock-up agreement, the Partnership Operating Agreement, the tax receivable agreement, the exchange agreement, the registration rights agreement and the stockholders agreement, filed herewith as Exhibits 2, 3, 4, 5, 6 and 7 respectively and incorporated herein by reference.

Other than the matters disclosed in this Schedule 13D, none of the Reporting Persons is party to any contracts, arrangements, understandings, or relationships with respect to any securities of the Issuer, including but not limited to the transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option agreements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies.

Item 7. Material to be Filed as Exhibits

SIGNATURES

After reasonable inquiry and to the best of each of the undersigned’s knowledge and belief, each of the undersigned, severally and not jointly, certifies that the information set forth in this statement is true, complete and correct.

Dated: September 21, 2020