425: Matterport Faces $79 Million Judgment in Share Restriction Case, Plans Appeal

Matterport is facing a $79 million judgment plus interest related to a 2021 case involving improperly restricted shares, which the company plans to appeal.

Summary

• On May 28, 2024, the Court of Chancery of the State of Delaware ruled against Matterport in the case of Brown v. Matterport, Inc.
• The court awarded William Brown $79,092,133.12 plus preand post-judgment interest due to the company incorrectly restricting him from trading his shares after the July 2021 de-SPAC transaction.
• Matterport disagrees with the ruling and intends to appeal.
• The judgment does not affect the planned acquisition of Matterport by CoStar Group, Inc., announced on April 21, 2024.
• Matterport does not expect any insurance coverage to be available for this matter.
• CoStar has filed a registration statement on Form S-4 with the SEC, including a preliminary prospectus and proxy statement, regarding the proposed transaction.
• Investors and security holders are urged to read the registration statement and other relevant documents filed with the SEC.
• The document also contains forward-looking statements regarding the proposed transaction and the litigation, which are subject to risks and uncertainties.

Sentiment

Score: 4

Explanation: The news is negative due to the significant judgment against Matterport, but the planned appeal and the ongoing acquisition provide some mitigation. The forward-looking statements also highlight numerous risks.

Positives

• The judgment is not expected to impact the planned acquisition by CoStar Group, Inc.

Negatives

• Matterport has been ordered to pay $79,092,133.12 plus interest due to a legal ruling.
• The company does not expect insurance coverage to be available for this matter.

Risks

• The outcome of any possible appeal of the litigation is uncertain.
• The proposed transaction with CoStar may not be consummated within the anticipated time period, or at all.
• The proposed transaction could disrupt Matterport's current plans and operations.
• The proposed transaction could divert management's attention from its ongoing business.
• The proposed transaction could affect Matterport's business, operating results, and ability to retain and hire key personnel.
• Matterport's stock price may decline significantly if the proposed transaction is not consummated.
• Legal proceedings related to the proposed transaction could arise.
• Matterport faces risks related to market share, economic conditions, supply chain disruptions, and the ability to manage growth effectively.
• Matterport faces risks related to retaining or recruiting officers, key employees or directors.
• Matterport faces risks related to the regulatory environment and complexities with compliance related to such environment.
• Matterport faces risks related to its ability to maintain an effective system of internal controls over financial reporting.
• Matterport faces risks related to its ability to achieve and maintain profitability in the future.
• Matterport faces risks related to its ability to access sources of capital.
• Matterport faces risks related to its ability to maintain and enhance its products and brand, and to attract customers.
• Matterport faces risks related to its ability to manage, develop and refine its technology platform.
• Matterport faces risks related to the success of its strategic relationships with third parties.
• Matterport faces risks related to its history of losses and whether it will continue to incur continuing losses for the foreseeable future.
• Matterport faces risks related to its ability to protect and enforce its intellectual property rights.
• Matterport faces risks related to its ability to implement business plans, forecasts, and other expectations and identify and realize additional opportunities.
• Matterport faces risks related to its ability to attract and retain new subscribers.
• Matterport faces risks related to the size of the total addressable market for its products and services.
• Matterport faces risks related to the continued adoption of spatial data.
• Matterport faces risks related to any inability to complete acquisitions and integrate acquired businesses.
• Matterport faces risks related to general economic uncertainty and the effect of general economic conditions in its industry.
• Matterport faces risks related to environmental uncertainties and risks related to adverse weather conditions and natural disasters.
• Matterport faces risks related to the volatility of the market price and liquidity of its Class A common stock and other securities.
• Matterport faces risks related to the increasingly competitive environment in which it operates.

Future Outlook

Matterport anticipates appealing the court's ruling and is proceeding with the acquisition by CoStar Group, Inc., subject to regulatory approvals and other conditions.

Management Comments

• The Company respectfully disagrees with the Court of Chancerys ruling and anticipates appealing the ruling.
• The judgment does not impact the consideration expected to be paid to Matterport stockholders pursuant to the Companys definitive agreement to be acquired by CoStar Group, Inc. dated April 21, 2024.

Industry Context

The acquisition by CoStar Group, Inc. reflects a trend of consolidation in the real estate technology sector, as companies seek to expand their offerings and market reach. The litigation highlights the importance of proper share management and compliance with securities laws, especially following de-SPAC transactions.

Comparison to Industry Standards

• It's difficult to compare the legal judgment directly to industry standards, as it is specific to the circumstances of the case.
• However, the acquisition by CoStar can be compared to similar deals in the real estate technology space, such as Zillow's acquisition of ShowingTime, which aimed to expand their service offerings.
• The size of the judgment is significant relative to Matterport's market capitalization and could impact investor sentiment.

Legal Proceedings

• The Court of Chancery of the State of Delaware issued a decision in the matter of Brown v. Matterport, Inc. and Matterport Operating, LLC (C.A. No. 2021-0595-LWW) (Del Ch.).

Stakeholder Impact

• Shareholders may be concerned about the financial impact of the judgment and the potential impact on the acquisition.
• Employees may be affected by the uncertainty surrounding the litigation and the acquisition.
• Customers and suppliers may be affected by any disruptions to Matterport's business operations.

Next Steps

• Matterport plans to appeal the Court of Chancery's ruling.
• The company will continue to work towards completing the acquisition by CoStar Group, Inc., including obtaining required regulatory approvals.
• CoStar will mail a definitive proxy statement/prospectus to stockholders of Matterport as of the record date after the Registration Statement has been declared effective.

Key Dates