The Good Technology settlement resolved shareholder litigation in the Delaware Court of Chancery over the company’s 2015 sale to BlackBerry Ltd. for $425 million, producing a combined $52 million in payments to common stockholders from Good Technology’s directors, affiliated venture capital firms, and the deal’s financial adviser, J.P. Morgan Securities. The case was captioned In re Good Technology Corporation Stockholder Litigation, C.A. No. 11580-VCL.
Who Was in the Class
The Court of Chancery certified the class on May 12, 2017. It covers all holders of Good Technology common stock as of October 30, 2015, and class members could not opt out; any judgment binds them.1Good Technology Settlement. Notice of Settlement Net proceeds were to be distributed to eligible class members on a per-share basis.
Common stockholders were largely rank-and-file employees, and they bore the brunt of the price gap between what Good Technology had once expected and what BlackBerry paid. Venture capital firms holding preferred stock took roughly $250 million of the $425 million in sale proceeds through their liquidation preferences. Common stockholders split about $40 million. Shares valued at $4.32 a year earlier were worth $0.44 under the BlackBerry deal, and some employees had already paid taxes based on the higher valuation.2Business Insider. Long Weird History of Good Technology3Business Insider. Employees Upset at Good Technology Sale to BlackBerry
Why Shareholders Sued
In March 2014, Good Technology’s board had rejected an $825 million all-cash acquisition offer from CA Technologies, expecting a planned IPO to value the company near $1 billion. The IPO never happened, market interest in mobile-device management faded, and the company raised $80 million in additional private funding before agreeing to sell to BlackBerry for $425 million in September 2015.2Business Insider. Long Weird History of Good Technology4Business Insider. How Christy Wyatt Sold Good to BlackBerry5FedScoop. BlackBerry Acquires Good Technology for $425 Million
Common stockholders sued the board of directors and CEO Christy Wyatt for breach of fiduciary duty. Six of the board’s nine members were managing directors or founders of venture capital firms invested in Good Technology, which plaintiffs said left the board conflicted when it approved a sale at a price that favored preferred stockholders over common ones.2Business Insider. Long Weird History of Good Technology
The plaintiffs also sued J.P. Morgan Securities, the company’s financial adviser on the sale. A second amended complaint alleged that J.P. Morgan was simultaneously advising Good Technology while cultivating a business relationship with BlackBerry, and that the bank used the Good Technology engagement to win future work from the larger buyer, contributing to a sale price below what other suitors had offered.6The New York Times. Good Technology Investors Sue J.P. Morgan, Claiming Conflicts
The Two Settlements
The $52 million total came from two separate agreements. In May 2017, the directors and their affiliated venture capital firms agreed to pay $17 million in cash to resolve the fiduciary duty claims.7Yahoo Finance. Laster Sends Challenge Good Technology A settlement hearing for that agreement was scheduled for November 5, 2018.1Good Technology Settlement. Notice of Settlement
A second proposed settlement of $35 million followed with J.P. Morgan Securities, resolving the conflict-of-interest claims tied to its role as deal adviser.7Yahoo Finance. Laster Sends Challenge Good Technology
The Arbitration Ruling That Slowed Things Down
A dispute arose over the term sheet for the $17 million director settlement, and it went before Vice Chancellor J. Travis Laster. In a memorandum opinion dated October 27, 2017, Laster held that the Court of Chancery lacked jurisdiction to resolve the disagreement because the term sheet required disputes to go to arbitration. He also found that questions about the recusal of mediator Robert A. Meyer fell within the arbitrator’s authority.7Yahoo Finance. Laster Sends Challenge Good Technology Settlement proceedings continued afterward.
The combined recovery represented a partial return for common stockholders who watched their shares lose roughly 90 percent of their value in a year, in a sale that valued Good Technology at less than half of the offer its board had turned down.8VentureBeat. After Good Technology’s $425M Fire Sale to BlackBerry, an Entrepreneur Offers His Windfall to Colleagues Who Lost Out