Client: J.P. Morgan Forced Its Sale -- WSJ
November 01 2016 - 3:02AM
Dow Jones News
By Liz Hoffman
J.P. Morgan Chase & Co. allegedly withheld a $12 million
payment to Good Technology Inc. last year, worsening a cash
shortage that forced the mobile-security company into a sale
brokered by the bank, according to newly public claims in a
continuing legal dispute.
The new details allege that the bank, in its capacity as a
customer of Good Technology, hastened the company's demise, even
while the bank was advising it on a sale.
The allegations were unsealed Friday as part of a continuing
lawsuit in Delaware court. The plaintiffs, including Good
Technology employees who owned shares, accused J.P. Morgan and the
company's venture capital backers of mismanagement and conflicts of
interest that resulted in a $425 million sale to BlackBerry
Ltd.
The plaintiffs argue that the deal, which brought J.P. Morgan
$4.1 million in fees, undervalued Good Technology.
The plaintiffs, which include Good's former CEO, have previously
argued that J.P. Morgan allowed Good Technology to be sold for
relatively little because the bank hoped to win future business
from BlackBerry.
J.P. Morgan, which had no immediate comment Monday, has
previously denied the allegations, as have the venture-capital
firms.
The plaintiffs' suit seeks to recover damages on behalf of
Good's employees and other common shareholders, who received
virtually nothing for their stock in the BlackBerry deal. Good was
at one point valued at $1 billion by private investors. Its 2015
sale to BlackBerry, for less than half that, was an early sign of
cracks in what was a hot market for private technology
companies.
Allegations questioning bankers' intentions in deals have become
more common, with plaintiffs' lawyers looking for signs that deals
were swayed by conflicts of interest.
The allegations unsealed Friday highlight a different risk: what
can go wrong when investment-banking business is mixed with tech
spending.
In the Silicon Valley rush, many Wall Street firms have bought
services from companies they hope to advise on mergers or in
initial public stock offerings. Some startup founders feel that
banks using their software can better promote a firm to potential
acquirers or IPO investors.
J.P. Morgan was Good Technology's largest customer, having
signed a $12 million contract with the company in late 2014,
according to court filings.
The complaint alleges that J.P. Morgan delayed paying its bill,
"accelerating the crash crunch that J.P. Morgan was supposed to
address as financial adviser." The complaint didn't provide details
of the contract or any billing schedule.
By 2015, Good Technology had delayed a planned IPO and was
burning through cash. At a May board meeting, Ron Fior, Good's
chief financial officer, "explained the impact of a delayed payment
by a very large customer on the company's cash position." That
customer was J.P. Morgan, according to the complaint, which was
filed in September and made more fully public Friday.
In July 2015, Mr. Fior emailed Good Technology CEO Christy Wyatt
a presentation showing that Good would run out of cash by August or
September, depending on when J.P. Morgan made its payment,
according to the complaint. Good Technology and BlackBerry
announced their deal in Sept. 2015.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
November 01, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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