Grubhub is facing 14 lawsuits from angry investors who say it misled them about its $7.3 billion takeover by Just Eat Takeaway

grubhub
GrubHub CEO Matt Maloney (C) applauds after ringing the opening bell before the company’s IPO on the floor of the New York Stock Exchange in New York April 4, 2014. Shares of GrubHub Inc, the biggest U.S. online food-delivery service, rose as much as 57 percent in its market debut as investors scrambled for a piece of the fast-growing consumer internet company.

  • Grubhub said it faces 14 lawsuits alleging it misled investors about its Just Eat Takeaway merger.
  • The lawsuits claim Grubhub withheld key financial protections and executives’ conflicts of interest.
  • Investors want the court to invalidate the merger until Grubhub secures a better deal for them.
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Grubhub disclosed in a regulatory filing Thursday that it’s facing 14 lawsuits from investors who say the company misled them about its plans to be acquired by Dutch food delivery giant Just Eat Takeaway.

The investors alleged that Grubhub executives and board members failed to disclose key financial details and massive payouts that they stood to receive as part of the merger, and that they failed to secure the highest possible price for Grubhub’s public shareholders, harming them financially as a result.

Frank Ferreiro, the lead plaintiff in the case, said in a lawsuit filed in New York last month that when Grubhub publicly announced the proposed merger, it withheld underlying financial data it had used to make assumptions about the companies’ future performance, as well as well as “golden parachutes,” job offers, and other lucrative perks guaranteed to Grubhub executives and directors.

Ferreiro’s lawsuit alleged that investors like himself – who would get roughly 0.67 share of Just Eat stock for each of their Grubhub shares regardless of either company’s stock price when the merger closes – lack the information to determine whether they’re getting a raw deal.

“Grubhub insiders are the primary beneficiaries of the Proposed Transaction, not the Company’s public stockholders,” the lawsuit stated.

Ferrerio also said that GrubHub didn’t try hard enough to get the best deal for public investors.

His lawsuit asks the court to invalidate the proposed merger agreement and force Grubhub to seek the “highest possible price” for any sale.

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Tesla ordered by judge to turn over documents related to Elon Musk’s $55 billion compensation plan

Elon Musk
  • A judge on Monday ordered Tesla to turn over documents concerning Elon Musk’s compensation plan.
  • Shareholders sued Tesla in 2018, arguing its board wronged investors by awarding Musk such a lucrative package.
  • The judge told Tesla to turn over communications between Musk and its top lawyers ahead of the board’s approval of the plan.
  • See more stories on Insider’s business page.

A Delaware judge on Monday ordered lawyers representing Tesla’s board of directors to turn over certain communications that CEO Elon Musk may have shared with the company’s top in-house attorneys before the board approved a compensation plan in 2018 that could net Musk more than $50 billion.

The ruling by Vice Chancellor Joseph Slights Jr. came in response to a motion to compel filed on behalf of shareholders who have accused Musk and Tesla’s board of directors of breaching their fiduciary duties to the company and its stockholders, granting unjust enrichment to Musk and wasting corporate assets.

While granting the plaintiffs access to certain documents that Musk either sent or received, Slights denied access to a broader range of other documents that defense attorneys have argued are similarly protected by attorney-client privilege.

Slights said documents that Musk shared with Tesla general counsel Todd Maron or deputy general counsel Jonathan Chang before the board signed off on the compensation plan should be provided to the shareholder plaintiffs.

The plaintiffs have argued that Chang and Maron, who was Musk’s former divorce attorney, worked to advance Musk’s interests and negotiated on his behalf against the board’s compensation committee.

“Leveraging his control, close personal relationships, and reputation for retribution, Musk co-opted Maron and Chang to help him structure the plan free from committee involvement,” plaintiffs’ attorneys wrote in asking Slights to force the company to turn over documents.

“Musk and his agents handed the committee a fully-baked plan,” they added.

While Slights agreed that communications directly involving Musk should be disclosed, he refused to order defense attorneys to turn over other communications among board members, Chang and Maron, and an outside law firm.

The judge said there was no basis for him to order the production of documents that may be protected by attorney-client privilege when the information might be available from other sources. He noted that Musk, Maron, Chang and compensation committee chair Ira Ehrenpreis have yet to be deposed in the case.

The plaintiffs argued in their motion to compel that Tesla was improperly shielding hundreds of documents that Maron or Chang shared with the compensation committee and its advisers.

Attorney Gregory Varallo told Slights on Monday that the plaintiffs in the lawsuit, which was filed in 2018, still don’t have an answer to a simple question: “Whose idea was the largest compensation plan ever designed?”

“If you read the record to date, no one seems to know,” said Varallo.

“There was quite a lot of sausage-making taking place before this was even a twinkle in the eye of the compensation committee,” he added.

Vanessa Lavely, an attorney representing the Tesla directors, told Slights that the board followed “a robust process” to develop and approve the compensation plan.

“There was absolutely no rubber-stamping here, and the defendants look forward to the opportunity to present this record to the court,” she said.

In 2019, Slights refused to dismiss the breach-of-duty claims against Musk and Tesla directors, and an unjust enrichment claim against Musk.

Under Delaware’s “business judgment” rule, courts typically give strong deference to a corporate board’s decision-making unless there is evidence that directors had conflicts or acted in bad faith. If a plaintiff is able to overcome the business judgment rule’s presumption, the board’s action is then subject to an “entire fairness” analysis, which shifts the burden to the corporation to show that the deal involved both fair dealing and fair price.

Slights said that because the plaintiffs had adequately pleaded that Musk was a controlling shareholder and had a conflict of interest, the case lent itself to “heightened judicial suspicion.”

Under the plan, Musk stands to reap billions if the electric car and solar panel maker hits ambitious market capitalization and operational milestones. For each of 12 milestones the company achieves, Musk, who already owned more than 20% of Tesla when the plan was approved, would get stock equal to 1% of outstanding shares at the time of the grant.

Each milestone includes growing Tesla’s market capitalization by $50 billion and meeting aggressive revenue and pretax profit growth targets. Musk would receive the full benefit of the pay plan, $55.8 billion, only if he leads Tesla to a market capitalization of $650 billion and unprecedented revenues and earnings within a decade.

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