February 28, 2024
Shareholders of 3D model maker Matterport Inc. accused top company officials in Delaware Chancery Court of self-dealing by paying themselves performance rewards following a 2021 merger, even though the company hadn’t met benchmarks to allow them to cash out $225 million in shares.
In a partially redacted derivative complaint made public Tuesday, shareholders Laurie Hanna and Vasana Smith accused 30 top company officials of wrongly taking so-called “earn out shares” intended as an incentive for strong stock performance following a 2021 merger that took Matterport public.
Hanna and Smith, however, claim the company never met any of the performance targets that would have allowed company officials to claim the earn out shares.
After a “rigged” process not disclosed in the redacted complaint, the company’s board approved the payments anyway in late January 2022, with the company’s CEO and board chairman R.J. Pittman and Chief Technology Officer Japjit Tulsi each taking more than a million dollars, the shareholders claim.
The shareholders filed their lawsuit last week, naming company investors as defendants, along with funds affiliated with semiconductor and wireless venture Qualcomm and venture capital and investment firms Lux Capital, Navitas Capital, Zigg Capital, Wafra and Felicis.
Hanna and Smith argue a 2021 merger agreement with investment firm The Gores Group LLC provided that earn out shares could be claimed if Matterport’s stock exceeded a series of six targets for 10 of 30 consecutive trading days during a five-year period that began on Jan. 18, 2022.
Since the period began, the company hasn’t met any of the six targets “even on one day,” the shareholders argue.
Company officials, however, knew Matterport stock would face downward pressure ahead of the Jan. 18 deadline since 69 million shares of the company locked up after the 2021 merger were set to be released on that date.
. . .
The shareholders are represented by Andrew S. Dupre of McCarter & English LLP, Edward S. Haber of Shapiro Haber & Urmy LLP, Steven J. Toll, Julie Goldsmith Reiser, Richard Speirs and Amy Miller of Cohen Milstein Sellers & Toll PLLC and Peretz Bronstein of Bronstein Gewirtz & Grossman LLC.
Read Matterport Stockholders Say Officials Wrongly Cashed $225M.