In a seller-friendly going-private transaction in the social media, internet, and digital advertising industry, the Buyer agreed to acquire the Company in a cash deal, then attempted to terminate the transaction.
The closing conditions for the transaction stipulated various Representations and Warranties, including that the Company’s SEC filings fairly depicted its financial condition and were complete and accurate in all material respects unless such deficiencies rose to the level of a Company Material Adverse Change.
A financial expert for defendants alleged, among other things, that the Company disclosed a performance metric in its SEC filings—Monetizable Daily Active Usage or Users (“MDAU”)—but internally tracked alternative usage metrics it did not disclose, and thus had materially misrepresented its performance.
On behalf of plaintiffs, Professor Mark E. Zmijewski, supported by Pavel Nikolov and Erik Himan, submitted a rebuttal analysis addressing these allegations. Professor Zmijewski examined whether the Company’s disclosure of user-engagement metrics was adequate and omitted no materially important information. He also analyzed whether other disclosed performance metrics, taken together with the MDAU, could be used to infer the allegedly omitted metrics.
The parties settled when the Buyer reversed course and agreed to proceed at the agreed-upon share price, and the transaction closed.