On Thursday, a common stockholder filed a complaint against “cloud-based software and services company” Synacor and members of its Board of Directors for purported violations of securities laws “in connection with the proposed acquisition of the Company via tender offer by CLP SY Holding, LLC through its wholly-owned subsidiary SY Merger Sub Corporation (‘Merger Sub’) and together with CLP Holding, LLC, ‘Centre Lane’) (the ‘Proposed Transaction’).”
According to the complaint, on February 11, 2021, Synacor entered into a Merger Agreement with Centre Lane, under which “Centre Lane commenced an all cash tender offer (the ‘Tender Offer’) to purchase all outstanding shares it doesn’t own of Synacor’s common stock for $2.20 per share.” Pursuant to the Merger Agreement, the Tender Offer is set to expire at 12:00 midnight EST on March 30, 2021.
The plaintiff alleged that on March 3, Synacor filed an incomplete and materially misleading recommendation statement with the Securities and Exchange Commission (SEC) regarding the Proposed Transaction. Specifically, the Recommendation Statement allegedly fails to provide material information about the financial projections in connection with the Proposed Transaction. The plaintiff stated that the SEC has noted that “disclosure of non-GAAP projections can be inherently misleading.” As a result, the plaintiff contended that Synacor must “provide a reconciliation table of the non-GAAP measures to the most comparable GAAP measures” for the Company’s financial projections included in the Recommendation Statement. In particular, the plaintiff asserted that Synacor “must disclose the line item projections for the financial metrics that were used to calculate the non-GAAP measures, including: (1) Adjusted EBITDA; and (ii) Unlevered Free Cash Flow.”
The plaintiff averred that the defendants were “obligated to carefully review the Recommendation Statement prior to its filing with the SEC and dissemination to the Company’s shareholders to ensure that it did not contain any material misrepresentations or omissions.” Furthermore, the plaintiff proffered that the Recommendation Statement misrepresents or omits information necessary for Synacor shareholders to make informed decisions for their vote on the Proposed Transaction.
The plaintiff added that the Recommendation Statement has the financial analyses and opinion of Canaccord Genuity about the Proposed Transaction but purportedly fails to provide material information, such as “the individual multiples and metrics for each of the transactions observed in the analysis” used for the analyses and opinion. Additionally, the plaintiff argued that there were also false or misleading statements or material misrepresentations or omissions for the sales process.
As a result, the plaintiff claimed that Synacor violated Sections 14(d), 14(e), and 20(a) of the Securities Exchange Act of 1934 and Rule 14d-9 promulgated thereunder.
The plaintiff seeks to preliminarily and permanently enjoin the defendants from proceeding with, consummating, or closing the Proposed Transaction; ordering the defendants to disseminate an amendment to the Recommendation Statement; an award for damages, costs, and fees; and other relief. The plaintiff is represented by Lifshitz Law Firm P.C.
