The recently announced acquisition of Finjan Holdings, Inc. (NASDAQ: FNJN), a cybersecurity and patent licensing firm, by Fortress Investment Group, a division of SoftBank, is being investigated for the appropriateness of the offer by at least five law firms.
The price agreed upon by the Finjan board was $44 million or $1.55 per share. Finjan traded as high as $2.33 as recently a January 16 and as low as little $.78 on March 18.
Halper Sadeh LLP stated in a news release:
“The investigation concerns whether Finjan and its board of directors violated the federal securities laws and/or breached their fiduciary duties to shareholders by failing to: (1) obtain the best possible consideration for Finjan shareholders; (2) determine whether Fortress is underpaying for Finjan; and (3) disclose all material information necessary for Finjan shareholders to adequately assess and value the proposed transaction.”
Another law firm, Rigrodsky & Long, P.A., is similarly investigating “regarding possible breaches of fiduciary duties and other violations of law related to Finjan’s agreement to be acquired by affiliates of Fortress Investment Group LLC.”
A third firm, Bragar Eagel & Squire, P.C., a “nationally recognized stockholder rights law firm,” is investigating on behalf of shareholders for basically the same reasons. Two other firms, Brodsky & Smith and Monteverde & Associates, also are scrutinizing the deal.
It is not terribly unusual for shareholders to claim unfair treatment, especially if they purchased their shares at a higher price than the offering. Various investors, such as funds, may be represented by respective law firms alleging mis-valuation, mid-management or an insufficient number of acquisition offers in an effort to attract a higher bid.
Finjan appears to have a unique position in the patent licensing space in that it is an operating company with a strong IP portfolio and respectable balance sheet. Most importantly, it has stood the test of repeated Patent Trial and Appeal Board challenges — no easy feat.
Despite some financial success, including a deal with IBM in 2017 to create Finjan Blue, and impressive legal gains, the company’s stock has languished, never selling higher than $4.61 back in October 2018, which it could not sustain. By December 17 it had declined to $2.21.
Finjan lost $.15 per share for the first quarter 2020, but still had almost $19 million in cash and equivalents, making a $44 million offer a less risky proposition.
If shareholders have a problem with the deal it may not stem from incorrect valuation or too few suitors, but the dour view of equity investors, which never really understood public IP companies (PIPCOs). Most PIPCOs have either merged, liquidated, changed their name or evolved their business model.
Finjan had hoped to be seen as a market success story; it may still be one under the auspices of a larger, more solvent business.
Image source: benhamouglobalventures.com; finjan.com