On Friday in the Eastern District of New York, a stockholder filed a complaint against Boingo Wireless, a wireless provider, and its board of directors for allegedly violating the Securities Exchange Act of 1934 in regards to a proposed transaction.
The lawsuit arose from the “proposed acquisition (the ‘Proposed Transaction’) of Boingo by White Sands Parent, Inc. (‘Parent’) and White Sands Bidco, Inc. (‘Merger Sub’). Parent and Merger Sub were formed by an affiliate of the private equity investment firm Digital Colony Partners II, LP (‘Digital Colony’).”
According to the complaint, Boingo announced on March 1 that it “entered into a definitive agreement and plan of merger to be acquired by an affiliate of Digital Colony.” Pursuant to the terms of the agreement, “Digital Colony will acquire all the outstanding shares of Boingo common stock for $14.00 per share in cash.” Boingo filed a preliminary proxy statement with the Securities and Exchange Commission, which the plaintiff claimed omitted or misrepresented material information about: “(i) Boingo’s financial projections; (ii) the financial analyses performed by Boingo’s financial advisor, TAP Advisors, LLC (‘TAP Advisors’), in connection with its fairness opinion; and (iii) the sales process leading up to the Proposed Transaction.”
As a result, the plaintiff proffered that these omissions make the following sections of the proxy statement false and misleading: “(i) Background of the Merger; (ii) Recommendation of the Board of Directors and Reasons for the Merger; (iii) Opinion of Boingo’s Financial Advisor; and (iv) certain Financial Projections.” For example, according to the complaint, the proxy statement in connection with the fairness of the financials allegedly did not disclose: “(1) all line items underlying (i) Revenue, (ii) Adjusted EBITDA, (iii) Cash EBITDA, and (iv) Company Cash Flow; (2) the Company’s net income projections; and (3) a reconciliation of all non-GAAP to GAAP metrics.” The plaintiff contended that this information is important because it gives stockholders a basis to project the company’s future financial performance and allows them to better understand the financial analyses.
Therefore, the plaintiff averred that until these misstatements and omissions are repaired before the shareholder vote, shareholders will be forced to vote without full and accurate disclosure of all material information.
The defendants are accused of violating Section 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder.
The plaintiff seeks to preliminarily and permanently enjoin the defendants from proceeding with, consummating, or closing the proposed transaction unless and until they disclose the material information discussed in the complaint; if the proposed transaction is consummated, to rescind it and award rescissory damages; declaratory judgment in his favor; an award for costs and fees; and other relief.
The plaintiff is represented by Halper Sadeh LLP.
