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Gigamon Low Merger Share Price Class Action

In the proposed merger with Elliott Management Corporation, Gigamon, Inc.’s shareholders are being offered $38.50 per share, roughly a 21% premium.  According to the complaint for this class action, this offer is too low, and the Proxy Statement filed with the Securities and Exchange Commission (SEC) omits material information that would allow shareholders to fully assess the transaction.

The class for this action are the public shareholders of Gigamon.

Gigamon’s business is visibility. It provides a platform that lets companies manage, secure and understand data and helps them guard against network and data breaches.

The complaint alleges that the company’s recent performance and prospects for growth deserve a higher consideration. For example, in 2016, the company marked a second consecutive year of 40% year-over-year growth. Also, the $38.50 offered is lower than the stock’s 2017 high of $47.85 and is a 60% discount over its 52-week high of $61.25.

The complaint claims that the Proxy as it is violates Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, and that if the Proxy included the material information now missing from it, shareholders would understand why the offer is inadequate.

To begin with, the complaint takes issue with the financial projections for the company on pages 56-59 of the Proxy. It claims that the company originally prepared three sets of figures for 2017-2026, for higher, midlevel, and lower performance.  Of those figures, the company first chose the midlevel figures, but that it later chose the lower figures and even revised them downwards. The complaint claims that the Proxy does not provide enough information about these figures.

The complaint further claims that the Proxy uses non-GAAP measures but does not provide the line-item projections used to calculate them or a reconciliation using GAAP measures, in violation of Regulation G. The complaint quotes former SEC Chairwoman Mary Jo White about the SEC’s recent issuance of guidance “addressing a number of practices which can make non-GAAP disclosures misleading” and claims that exceptions to Regulation G do not apply.

Also, the complaint claims that the company’s financial advisor used certain projected line item financial measures, including the company’s unlevered free cash flows (UFCF), in its presentation in the Proxy, but that the definitions and calculations used to calculate UFCF are not included.

All of this amounts to violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, the complaint alleges, in addition to other rules and regulations. It asks the court to stop the merger from proceeding until the missing information has been disclosed. 

Article Type: Lawsuit
Topic: Securities

Most Recent Case Event

Gigamon Low Share Price, Misleading Merger Proxy Securities Complaint

November 17, 2017

In the proposed merger with Elliott Management Corporation, Gigamon, Inc.’s shareholders are being offered $38.50 per share, roughly a 21% premium—yet according to the complaint for this class action, the offer is too low, and the Proxy Statement filed with the Securities and Exchange Commission (SEC) omits material information that would allow shareholders to fully assess the transaction. The complaint cites the company’s choice of low performance figures, the lack of a reconciliation of non-GAAP with GAAP measures, and the lack of line items and definitions used to make certain calculations. 

gigamon_sec_compl.pdf

Case Event History

Gigamon Low Share Price, Misleading Merger Proxy Securities Complaint

November 17, 2017

In the proposed merger with Elliott Management Corporation, Gigamon, Inc.’s shareholders are being offered $38.50 per share, roughly a 21% premium—yet according to the complaint for this class action, the offer is too low, and the Proxy Statement filed with the Securities and Exchange Commission (SEC) omits material information that would allow shareholders to fully assess the transaction. The complaint cites the company’s choice of low performance figures, the lack of a reconciliation of non-GAAP with GAAP measures, and the lack of line items and definitions used to make certain calculations. 

gigamon_sec_compl.pdf
Tags: Mergers or Acquisitions, Providing False or Misleading Information, Proxy Statement, Securities