M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Friday, June 14, 2013

Tee'ing up the Google litigation

Next week (Tuesday) we'll hear arguments in the Google shareholder litigation (Complaint).  Shareholders are challenging a recapitalization plan that would have Google issue a new series of shares, Series C, that would have no voting rights.  Google intends to use this new series of shares as an acquisition currency and to fund stock option programs.  Use of these new shares has the side benefit of not diluting the voting control of Google's founders Larry Page and Sergei Brin.  So comes the question:  is this entirely fair to non-controlling shareholders.  In the joint pre-trial stipulation, the parties agree on certain facts and questions that are at issue in the trial.  It's worth reading before you dip your toes too far into the Google water.  Some of the most relevant questions for the Chancellor to consider taken from the stipulation are below:

1. Whether the Recapitalization is entirely fair.

2. Whether the Recapitalization is motivated, in whole or in large part, by the desire of the Founders to entrench themselves in office for an extended period of time. ...

5. Whether the Special Committee, and each of its members, was disinterested and independent. ...

8. Whether the Special Committee functioned effectively and bargained at arm’s length, with the best interests of the Class A stockholders in mind. ...

10. Whether the failure of the Special Committee to obtain an opinion concerning the relative fairness of the Recapitalization to the two classes of stock, one of which is owned primarily by a controlling group, is in violation of Delaware law.

11. Whether the Special Committee failed in its duties by failing to bargain for limitations on the Founders’ control based on their performance, the passage of time, or other factors. ...

14. Whether Page took steps to undermine the Special Committee process. ...

18. Whether the Proxy Statement misrepresented certain facts, and omitted others, such that defendants breached their duty of candor. ...

If CVN gets the go-ahead to broadcast the arguments, I'll get the popcorn ready and will be along for the ride. 



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