As a shareholder, one expects and trusts that leadership will employ sound business plans and act in a way to better the corporation. On the other hand, as management, seniors expect to retain the ability to respond to shareholder concerns and demands. When a division occurs between shareholders and a company's leadership, a shareholder derivative action often results.
Hewlett-Packard (HP) began settlement discussions with a shareholders group that initiated a suit against the company and CEO over the erred 2011 acquisition of Autonomy, a software firm. Lawyers involved in the shareholder derivative lawsuit discussions recently sat down in San Francisco.
The shareholders group sued the computer company in 2012 in for misleading statements about the financial status of Autonomy, which was acquired by the company. HP paid $11 billion for the software firm; however, it later conceded to overpaying in the deal, writing down the value of Autonomy by about $5 billion as part of an $8.8 billion write-down in late 2012.
HP asserts that Autonomy's prior management engaged in actions that intended to inflate the purported value of the company before the acquisition. The computer company referred the matter to investigative regulators in both the U.S. and U.K.
Nevertheless, some shareholders wonder how HP could have missed so many issues with Autonomy before acquiring it. Specifically, shareholders assert that there must have been some opposition in board deliberations. Nevertheless, CEO Meg Whitman stands by the acquisition of Autonomy, but not the paid price.
More specifically, shareholders in the case (plaintiffs) note that Whitman wanted to pull HP out of the acquisition deal she had previously voted in favor of as a director. If that truly occurred, shareholders want to know what prompted her hesitation. For example, did she know something about the status of Autonomy's finances prior to the closing of the deal? In November, a judge ruled that the company and CEO would have to answer the allegations against them in court.
This matter is just one of the several suits surrounding the Autonomy deal, which has been plaguing the computer company for a few years after the closing of the acquisition. New revelations concerning the company have created even more questions in the minds of shareholders.
With concern to the matter, HP claims that Autonomy purportedly resold computers at a loss near the end of its fiscal quarters in an effort to strengthen its picture of financial performance. It also says that Autonomy used improper transactions with third-party resellers to create the facade of software license revenue. However, the company has denied the assertions from HP.
Only time will reveal the degree of HP's accountability in the Autonomy deal. If you or your company is involved in a shareholders suit, it may help to flesh out the issues with an experienced business law attorney.