Connected-car and location-based service provider Telenav and members of its Board of Directors were sued on Wednesday in the Northern District of California by a Telenav common stock owner, who alleged that the defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, SEC Rule 14a-9, and Regulation G in connection with a proposed merger with V99 Inc., whereby “Telenav (will) continu(e) as the surviving corporation as a direct wholly owned subsidiary of V99.”
Under the Merger Agreement for the proposed transaction, “Telenav shareholders will receive $4.80 in cash for each share of Telenav common stock owned.” Thus, the proposed transaction valued Telenav for approximately $241 million. The plaintiff said the Board recommended that stockholders vote in favor of the Proposed Transaction. Moreover, the plaintiff noted that shareholders of Telenav “will own approximately 36% of the post-transaction entity and V99 shareholders will own 64% of the post-transaction entity.” According to the plaintiff, in an effort to get shareholders to vote in favor of the Proposed Transaction, the Board “authorized the filing of a materially incomplete and misleading Proxy Statement on Schedule 14A … with the Securities and Exchange Commission (SEC).
The plaintiff averred that the proxy statement contained materially incomplete and misleading information about Telenav’s financial forecasts, which the Board allegedly used to recommend to stockholders to vote in favor of the deal. Specifically, the plaintiff alleged that the proxy statement in relation to the company projections failed to provide: “(i) the value of certain line items used to calculate (a) Operating profit, (b) income before taxes, (c) income from continuing operations, (d) net income, (e) pro-form a net income, and (f) adjusted EBITDA, all of which are non-GAAP measures; (ii) a reconciliation to its most comparable GAAP measures, in direct violation of Regulation G and, consequently, Section 14(a); and (iii) stock-based compensation.”
As a result, the plaintiff claimed that the defendants breached their obligation to ensure that the proxy statement was accurate. The plaintiff noted that the SEC requires that “if the most directly comparable GAAP measure is not accessible on a forward-looking basis, the company must disclose that fact, provide any reconciling information that is available without unreasonable effort, identify any unavailable information and disclose the probable significance of that information.”
Additionally, these purportedly troublesome forecasts were used by the company’s financial advisor for its financial analysis and to conduct its valuation analysis, which supported its opinion. The plaintiff argued that the omission from the statement must be disclosed to stockholders before they vote in order to allow them to make a properly informed decision about the merger.
The plaintiff has sought to preliminarily and permanently enjoin the defendants “from proceeding with, consummating, or closing the Proposed Transaction, unless and until the Company discloses the material information” allegedly omitted from the proxy statement. If the proposed transaction is consummated, the plaintiffs request that it be rescinded and set aside and for rescissory damages to be awarded.
The plaintiff is represented by Wolf Haldenstein Adler Freeman & Herz LLP.