Unsurprisingly, Rightside has been sued after announcing its planned sale to Donuts.
The lawyers are circling.
Seattle law firm Breskin Johnson & Townsend PLLC has filed a lawsuit (pdf) on behalf of Rightside (NASDAQ:NAME) shareholder Susan Paskowitz challenging the deal Rightside struck to be acquired by Donuts for $213 million. The suit seeks class action status.
Up until 2015, nearly 90% of merger and acquisition deals over $100 million were litigated like this. The number dropped significantly last year after a judge shot down a “Disclosure-Only Settlement” involving Trulia. Disclosure-only settlements basically require the company to disclose more information and pay the lawyers’ fees. The shareholders don’t really get anything out of these settlements.
The suit against Rightside claims more should have been disclosed, but also takes issue with deal lock up terms that do not permit Rightside to shop the deal and a $7.7 million breakup fee due to Donuts if the deal falls through.
Amusingly, it appears the lawyers took some of the language for the lawsuit from an old SEC filing or investor presentation. It states:
The Company currently has 16 million domain names under management, more than 20,000 distribution partners, an award-winning retail registrar, and the leading domain name auction service through its NameJet joint venture.
The only part of this statement that was accurate after Rightside sold its eNom business to Tucows in January of this year was the retail registrar portion.