A Marketo shareholder has filed a class action lawsuit in California to block the company's proposed acquisition by Vista Equity Partners.
In a suit filed in Santa Clara County Superior Court, Sonila Porwal alleges Marketo’s directors breached their fiduciary duties to Marketo stockholders by seeking to sell Marketo too cheaply through an allegedly defective process, and that the other defendants aided and abetted those purported breaches.
The lawsuit, filed on behalf of Porwal "and all other public shareholders," also alleges that defendants have failed to disclose all material facts concerning the proposed deal to stockholders. (Update: A second class action suit has been filed against Marketo.)
Porwal told CMSWire this morning that she is a former Marketo database analyst who left the company in 2014.
$1.79B Private Equity Investment
As part of the deal, Vista wants to pay $35.25 a share for each of the marketing automation company's outstanding shares, which represents a 9.5 percent premium to the closing price the day before the deal was announced, and a 64 percent premium to the May 9 closing price.
However, it is significantly lower that the company's January 2014 peak price of $42.79 per share.
Marketo stock closed yesterday at $35.03 per share.
Shareholder Wants to Block Deal
The lawsuit seeks, among other things, to block the proposed sale and rescind the agreement to sell, which Porwal characterized as grossly inadequate and said undervalues Marketo.
In an 8-K filing with the US Securities and Exchange Commission, Margo M. Smith, Marketo's senior vice president and general counsel, claims the plaintiff’s allegations lack merit and noted that the company "will vigorously contest them."
The consensus 12-month price target from brokerage firms covering Marketo stock is $34.21. However, according to data provided by Thomson/First Call, the consultant and data provider for The Wall Street Journal Best on the Street Analysts Survey, the highest current target price estimate stands at $55 and the lowest target price estimate is $22.
Three analyst firms — JMP Securities, Bernstein and JP Morgan — downgraded Marketo stock last month. And on Friday, CEO Phil Fernandez sold 21,600 shares of his company's stock at an average price of $34.98, for a total value of $755,568.
Marketo is expected to announce second quarter financial results on July 21.