Thursday, August 10, 2006
(8:41 AM) | Adam Kotsko:
"I'll take a soy latte -- hold the usury"
Doing some research today on Caribou Coffee -- the #2 coffee shop chain in America, known for its hunting lodge-style shops -- I happened to be browsing through their 10-K and came across the following section in their risks section:Risks Related to Our StructureI looked over that paragraph again and again, unable to fathom why a coffee shop chain founded in the Midwest would adhere to Shari'ah law. The following section was
Arcapita has substantial control over us, and could limit other shareholders’ ability to influence the outcome of matters requiring shareholder approval and may support corporate actions that conflict with other shareholders’ interests.
Arcapita beneficially owns 11,672,245 shares, or approximately 60.6%, of the outstanding shares of our common stock as of January 1, 2006. Arcapita’s ownership of shares of our common stock could have the effect of delaying or preventing a change of control of us, could discourage a potential acquirer from obtaining control of us, even if the acquisition or merger would be in the best interest of our shareholders, or could otherwise affect our business because of our compliance with Shari’ah principles as described below. This could have an adverse effect on the market price for shares of our common stock. Arcapita is also able to control the election of directors to our board. Two of the six members of our board of directors are representatives of Arcapita. [emphasis added]
Our compliance with Shari’ah principles may make it difficult for us to obtain financing and may limit the products we sell.So presumably Starbucks could widen their lead by stocking Barely Legal, and Caribou would be powerless to respond. As it turns out, Arcapita is a Bahrain-based venture capital firm that adheres to Islamic financial practices -- their annual report includes a segment by their Shari'ah consultants.
Our majority shareholder operates its business and makes its investments in a manner consistent with the body of Islamic principles known as Shari’ah. Consequently, we operate our business in a manner that is consistent with Shari’ah principles and will continue to do so for so long as Arcapita is a significant shareholder. Shari’ah principles regarding the lending and borrowing of money are complicated, requiring application of qualitative and quantitative standards. The negotiation and documentation of financing that is compliant with these principles are generally complex and time consuming. As such, if we have immediate liquidity needs, we may not be able to obtain financing that is compliant with Shari’ah principles on a timely basis. A Shari’ah-compliant company is prohibited from engaging in derivative hedging transactions such as interest rate swaps or futures, forward options or other instruments designed to hedge against changes in interest rates or the price of commodities we purchase. Also, a Shari’ah compliant company is prohibited from dealing in the areas of alcohol, gambling, pornography, pork and pork-related products.
So yeah. Caribou Coffee follows Shari'ah law. I suppose that if some investment group came along and offered to make me a multi-millionaire overnight, I'd probably just go ahead and follow Shari'ah law as well. I hardly eat pork as it is.
