Introduction to the Dispute
The biggest outside investor in digital wallet provider Curve has filed a lawsuit seeking to reverse its £125 million sale to Lloyds Banking Group. This move comes after months of negotiations between the parties involved, culminating in a deal that has sparked significant controversy.
Background of the Lawsuit
The lawsuit, filed by IDC Ventures in the High Court, alleges serious failings by key directors and investors, including Curve founder and CEO Shachar Bialick and board chairman Lord Fink. IDC accuses the directors and Hanaco, another major shareholder in Curve, of undermining shareholder rights, concealing material information, and enabling Hanaco to secure disproportionate economic rights and voting control at the expense of other shareholders.
Details of the Allegations
The lawsuit claims that there was an intentional concealment of material information by certain parties from the board and shareholders, coupled with breaches of contract and directors’ dereliction of duty. This, according to IDC, resulted in financial distress that was then used to effect a highly favorable voting restructuring in favor of Hanaco and allied directors to the detriment of other shareholders.
Impact on Shareholders
IDC believes that over £670m of shareholder value has been destroyed as a direct result of these actions. The company views the transaction as highly questionable, given the governance failures and the depressed valuation of Curve. Lloyds, despite being informed of these concerns, chose to proceed with the transaction without regard to the litigation.
Response from Lloyds
Lloyds has stated that the acquisition of Curve would allow it to offer its 28 million customers an enhanced mobile banking payments experience. However, the bank’s decision to proceed with the transaction despite the objections of significant shareholders has raised eyebrows.
Stakeholder Positions
IDC owns a 12% stake in Curve, having first invested in the company six years ago. A recent attempt to remove Lord Fink and Mr. Bialick as directors of the company failed. Mr. Bialick has previously admitted that the sale price was disappointing and warned that the company was likely to run out of cash this year unless a sale to Lloyds was agreed.
Conclusion
The dispute between IDC Ventures and Curve, with Lloyds Banking Group now involved, highlights the complexities and challenges of corporate transactions, especially when there are disagreements among shareholders. The outcome of this lawsuit will be closely watched, as it may have significant implications for the future of Curve and the rights of its shareholders.
