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Shareholders in cybersecurity company Proofpoint will be “irreparably harmed” if a proposed acquisition goes ahead, a new class action lawsuit alleges.
The class action lawsuit, filed in California on June 14 by Plaintiff Susan Finger, alleges that Proofpoint and its board of directors violated the Securities Exchange Act and demands the courts block the acquisition until all violations are resolved.
According to the claim, Proofpoint – a leading cybersecurity company — will be acquired by private equity firm Thoma Bravo, L.P this year in a deal that will shortchange current Proofpoint shareholders while lining the pockets of current employees and the board. The class action lawsuit claims that shareholders were misled by the company and the board in the company’s Proxy Statement, filed in preparation of the merger.
“In short, unless remedied, Proofpoint’s public stockholders will be irreparably harmed because the Proxy Statement’s material misrepresentations and omissions prevent them from making a sufficiently informed voting or appraisal decision on the Proposed Transaction,” the claim states.
“Plaintiff seeks to enjoin the stockholder vote on the Proposed Transaction unless and until such Exchange Act violations are cured.”
After Proofpoint’s record earnings in Q1 of 2021, Thoma Bravo issued a press release announcing that it had entered into an Agreement and Plan of Merger to acquire the company. The Proposed Transaction is valued at approximately $12.3 billion, the class action lawsuit says.
However, Finger alleges that Proofpoint filed a materially incomplete and misleading Proxy Statement with the SEC and disseminated it to Proofpoint’s stockholders as the basis of the acquisition.
“The Proxy Statement misrepresents or omits material information that is necessary for the Company’s stockholders to make an informed decision whether to vote in favor of the Proposed Transaction or seek appraisal.”
Specifically, the claim says that the Proxy Statement — which recommends that Proofpoint stockholders vote in favor of the acquisition — omits or misrepresents material information concerning financial projections; information underlying the financial valuation that supports the fairness opinion provided by Morgan Stanley; and Morgan Stanley’s potential conflicts of interest.
Finger says that Proofpoint’s issuance of the false and misleading Proxy Statement is in violation of the Exchange Act.
“Specifically, the Proxy Statement fails to disclose the line items underlying the Company’s unlevered free cash flow and EBIT over the projection period from 2021 through 2030,” she says in the class action lawsuit.
Finger adds that Proofpoint insiders are the primary beneficiaries of the acquisition, not the public stockholders.
“The Board and the Company’s executive officers are conflicted because they will have secured unique benefits for themselves from the Proposed Transaction not available to Plaintiff and the public stockholders of Proofpoint,” she says in the claim.
“The defendants were at least negligent in filing the Proxy Statement with these materially false and misleading statements.”
Finger is suing for violations of the Security Exchange Act and seeks an order of enjoinment, damages, legal fees, and a jury trial.
Recently, pharmaceutical company AcelRx and its executives were also hit with legal action for allegedly making false statements about the company’s business and signature product DSUVIA in the company’s Proxy Statement and in the media, harming investors.
Has a company ever misrepresented itself to you as a shareholder and caused you to lose money? Let us know in the comments section!
Finger is represented by Joel E. Elkins and Richard A. Acocelli of Weisslaw LLP.
The Proofpoint Securities Exchange Act Class Action Lawsuit is Finger v. Proofpoint, Inc., et al., Case No. 5:21-cv-04567-NC, in the U.S. District Court Northern District of California.
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