As private equity firms continue to buy up publicly traded companies, they are increasingly trying to appease mutual fund companies and other stockholders that could halt the deal, The Wall Street Journal reports.

Two deals awaiting shareholder approval would allow current shareholders to participate in ownership of the takeover target firm along with the private equity firm through so-called “stub equity” that would trade over the counter rather than on an exchange.

This is causing some mutual fund companies to determine whether their fund prospectuses will, indeed, permit them to hold stub equity. American Funds and Fidelity Investments said there is nothing to prevent them from holding stub equity.

However, Jeff Tjornehoj, a senior research analyst at Lipper, said it most likely that only those funds with very aggressive growth styles would hold stub equity.

While many private equity firms are successful at achieving 20% annual returns on their takeover returns through restructuring, layoffs and taking on debt, sometimes, they fail to succeed.

Stub equity holders also would not have the same voting rights are regular equity holders, and because the securities would be issued in small amounts and traded over the counter they would be thinly traded and hard to value.

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