On December 6, plaintiff John Thompson filed a class action complaint against defendants Fitbit, Inc., et al (John Thompson v. Fitbit, Inc., et al 1:19-cv-02236-UNA) for violating the Securities Exchange Act of 1934 in relation to Google parent Alphabet’s proposed purchase of Fitbit.
Fitbit’s Board of Directors entered a merger agreement with Google in November. As part of the agreement, Fitbit’s stockholders will get $7.35 for each share they own. Fitbit filed a proxy statement with the SEC for the proposed transaction; Thompson alleged the proxy statement, which is issued to solicit a shareholder vote, leaves out information important to the transaction, which means the statement violated the Securities Exchange Act and is false and misleading.
Among the materials the proxy statement excludes are information about the company’s financial projections and the analyses performed by Qatalyst, a financial advisor on the deal; useful information to stockholders. The complaint states, “[w]hen a banker’s endorsement of the fairness of a transaction is touted to shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and range of ultimate values generated by those analyses must also be fairly disclosed.” Therefore, according to the complaint, the proxy statement is false and misleading because of omissions in various sections, including Background of the Merger; Recommendation of our Board and Reasons for the Merger; Opinion of Fitbit’s Financial Advisor; and Financial Projections. The omission of the material is harmful because stockholders will look at the available information when deciding how to vote on the proposed acquisition. Additionally, Fitbit and other defendants did not correct information despite their control over the proxy statement.
Thompson has sought to prevent the proceeding, consummating or closing of the proposed transaction. If it proceeds, to rescind it and award damages. Additionally, for a true and non-misleading proxy statement to be made available, and financial relief.
Thompson is represented by Rigrodsky & Long. The complaint was filed in the Delaware District Court.