Lawsuit Accuses J.P. Morgan of Mismanagement and Breach of Fiduciary Duty
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UPDATED: Mar 5, 2017
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The former shareholders of Good Technology have 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.
BlackBerry’s Acquisition of Good Technology
On September 4, 2015, BlackBerry announced that it was acquiring Good Technology for $425 million. Good Technology was a mobile software maker that generated a considerable portion of its revenues form secured email on different devices, including iPhone and Android. Good was also working on a push to become a full mobile platform for app development and deployment.
At the time of its acquisition, Good had been planning a public offering, but its financial struggles made it difficult to face to scrutiny of an IPO. Good’s acquisition by BlackBerry was seen by some as a win/win scenario, with Good gaining an exit strategy for its investors and a way to avoid the scrutiny of an IPO, and Blackberry getting a larger installed base, the ability to upsell Good customers with additional components, and a way to retrieve many of its previous customers.
J.P. Morgan’s Involvement
Good Technology’s former shareholders did not see the company’s sale to BlackBerry as a win/win. The former shareholders of Good sued J.P. Morgan and its venture capitalist backers in Delaware Chancery Court for its role it the sale. According to newly public documents, J.P. Morgan Chase & Company allegedly withheld a $12 million payment to Good Technology before its acquisition by BlackBerry. Plaintiffs claims that J.P. Morgan was advising both Good Technology and BlackBerry at the time of the deal and that it prioritized its relationship with BlackBerry.
Good Technology claims that J.P. Morgan’s withheld cash payment worsened its cash shortage and forced it into a sale that was brokered by J.P. Morgan. Good Technology alleges that J.P. Morgan, in its capacity as a customer of Good Technology, hastened the company’s demise while it was also acting as an advisor on its sale.
According to the complaint, J.P. Morgan delayed paying its bill “accelerating the crash crunch that J.P. Morgan was supposed to address as financial adviser.” In July 2015, Good Technology CFO Ron Fior sent a presentation to Good Technology CEO Christy Wyatt explaining that Good would run out of cash by August or September, depending on when J.P. Morgan made its payment. The deal between Good Technology and BlackBerry was announced in September 2015.
Good Technology and its employees who owned shares accuse J.P. Morgan and its venture capital backers of mismanagement and conflicts of interest. J.P. Morgan had been Good Technology’s largest customer; it signed a $12 million contract with the company in 2014.
The plaintiffs claim that the deal undervalued Good Technology because J.P. Morgan hoped to win future business from BlackBerry. Good Technology was once valued at $1 billion by private investors, but was sold for less than half that amount. J.P. Morgan made $4.1 million in fees through the sale of Good Technology to BlackBerry.
Plaintiffs seek damages on behalf of Good Technology’s employees and stockholders, who received almost nothing for their stock in the BlackBerry deal.