Internet Technology

ICANN Board blocks .org sale to Ethos Capital LLC

Internet .org sale ethos capital

ICANN, the not for profit entity responsible for internet domain management has on April 30, 2020, rejected the proposed controversial sale of Public Interest Registry (“PIR“) to private equity firm Ethos Capital LLC (“Ethos Capital“). PIR, a non-profit subsidiary of another non-profit the Internet Society, runs the .org domain registry. The .org domains are mostly used by non-profits and global organisations which includes the United Nations and the World Bank.

Ethos Capital .org background

On 11 November 2019, PIR entered into an equity purchase agreement whereby Ethos Capital, was supposed to acquire 100% of the equity interest in PIR. PIR is one of the longest-standing and largest registries that controls a total of seven internet domains. The domains include .org, .ngo, .ong, and four internationalized domain names (IDNs) recognized as “organisation,” “org” or “institution” in non-Latin-based scripts – Devanagari (Hindi script), .संगठन; one in Russian Cyrillic, .орг; and two in simplified Chinese, .机构 and .组织机构.

Ethos Capital – PIR conversion to LLC

The acquisition also included the conversion of PIR from non-profit to a for-profit entity and name change from Public Interest Registry to Public Interest Registry, LLC. The announcement created a backlash from rights groups which included the Domain Name Rights Coalition, EFF, NTEN, Access Now. The final nail in the coffin, however, came in on April 15, 2020, when the California Attorney General wrote a scathing letter to ICANN urging it to reject the Ethos Capital deal. ICANN is registered as a non-profit in the State of California. The internet regulator received and considered more than 30 letters from stakeholders in the process.

ICANN – PIR Contract

ICANN’s contract with the PIR required PIR to provide no less than thirty(30) calendar days advance notice to ICANN before the consummation of any transaction anticipated to result in a direct or indirect change of control of the Registry Operator and seek its approval. ICANN’s consent on a change of control is subject to background checks on any proposed contracting party.

On Thursday, while rejecting the deal, ICANN Board noted that Ethos Capital is a brand-new entity and has no experience in managing a registry the size of PIR. However, Ethos Capital had pointed out that their founder Fadi Chehade had previously led the acquisition of the domain registry company Donuts. ICANN noted that such an argument, “only demonstrates a track record of acquisition and does not demonstrate an ability or track record of successfully operating a registry operator, particularly one the size of .org.”

The purchase price as publicly announced was US$1.135 billion, and was supposed to be financed through a combination of cash from equity partners and a US$360 million term loan facility entered into by lenders to Purpose Domains Direct, LLC, the borrower and post-transaction direct parent of PIR. The $360 million debt trap also raised concerns over the long term stability of PIR post-acquisition.

Commenting on the decision of ICANN Board, Ethos Capital said ICANN has overstepped its purview and the decision sets a dangerous precedent. PIR stated that ICANN’s decision represents a failure to follow its bylaws, processes, and contracts.

About the author

KP Krishna

Krishna KP is the founder of Preview Tech. He is a marketing geek and helps webmasters to monetize their web properties. When not online he is involved in debates with his friends over the issues that concern the world!

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