Stockholder Brian Jones filed a lawsuit against U.S. Well Services (USWS) Tuesday. The plaintiff claims that defendant USWS, its President, CEO, Board Chairman, and numerous directors violated multiple sections of the Exchange Act by deceiving stockholders while attempting a merger with another company.
USWS is a company that provides hydraulic fracturing services, court filings state. On June 21, USWS agreed to a merger with fellow fracturing company ProFrac. Under the terms of the agreement, USWS would be acquired by ProFrac, and all USWS shareholders would receive 0.3366 shares of ProTrac for every 1 share of USWS stock they possessed.
As is customary, the company must submit a proxy statement to the Securities and Exchange Commission (SEC), the complaint said. In that statement, they reportedly urged shareholders to vote in favor of the deal. The plaintiff claims that this statement contains “materially incomplete and misleading” information in several matters, chiefly the financial projections, the analysis that contributed to the fairness opinion, lack of disclosure regarding the terms of the confidentiality agreements between the two companies, and potential conflicts of interest.
The plaintiff claims the proxy statement was missing parts of the cash flow analysis, including the unlevered free cash flows and USWS’s own projections for ProFrac. It is also alleged that the defendant failed to disclose what financial metrics were used to calculate the statistics they did include in the projections. The neutrality of certain defendants in the lawsuit has also been called into question. The plaintiff claims that the statement “fails to disclose the details of any services Piper (a financial advisor who had worked with ProTrac on previous business) or its affiliates have provided to USWS or its affiliates in the two years prior to the delivery of its fairness opinion, and any compensation Piper or its affiliates have received for such services provided.” The suit expresses concern over the lack of information regarding Piper’s compensation, and claims that positions were being handed out for when the merger is complete.
The plaintiff says that the defendant “disseminated a false and misleading Proxy Statement” in order to influence the vote of the stockholders, which would be a violation of section 14(a) of the Exchange Act.
As compensation, the plaintiff requests that the court enjoin the defendants from completing the proposed merger or rescind the merger upon completion. The plaintiff also requests that an accurate and complete proxy statement is filed, and that the defendants are compensated for any damages.
The plaintiff is represented by Acocelli Law.
