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Micro Focus shareholder class action suit

(Updated Apr 30, 2022.)  Website operated by volunteers. Not officially endorsed or supported. Comments: info@hpalumni.org

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Apr 29, 2022: Five shareholders who "...purchased or acquired Micro Focus ADSs [American Depository Shares]... in connection with the Merger of Micro Focus and the software business segment of HPE, which was completed on September 1, 2017" have filed a class action against Micro Focus and HPE -- alleging that "...a number of problems seriously undermining Micro Focus’s business and prospects" were not disclosed and citing "...a decline of more than 54% from the Merger closing price..."

The relevant documents are posted on a public website operated by the three law firms representing the plaintiffs: https://www.microfocusclassaction.com

(In 2015, HP settled an Autonomy shareholder class action for an estimated payout of $0.07 per share to those who "...purchased or otherwise acquired shares of Hewlett-Packard Company’s publicly traded common stock in the open market... from November 22, 2010 to and through August 18, 2011."  It was alleged that "...the price of HP’s publicly traded common stock was artificially inflated..." Autonomy Settlement )


From the notice authorized by the Superior Court of The State of California County of San Mateo

...You are a member of the Class if you purchased or acquired Micro Focus ADSs pursuant to the Offering Materials issued in connection with the Merger of Micro Focus and the software business segment of HPE, which was completed on September 1, 2017...

Your Legal Rights And Options In This Lawsuit

- Do Nothing... Stay in the lawsuit. Await the outcome. Share in possible benefits. Give up certain rights...

- Ask to Be Excluded from the Class... you will not be entitled to any recovery that may result from this class action, but you will not be bound by any past or future rulings for or against Defendants. You will be free to pursue your claims against Defendants on your own or as part of a different lawsuit...

https://www.microfocusclassaction.com/Content/Documents/Notice.pdf


Key paragraphs from the complaint filed by the law firms...

1. Plaintiffs bring this action... against Micro Focus and certain of the Company’s directors, senior executives, and authorized representatives (collectively, “Defendants”), on behalf of Plaintiffs and all other persons or entities, except for Defendants, who purchased or otherwise acquired American Depositary Shares (“ADSs”) of Micro Focus, pursuant to the interrelated Registration Statements on Forms F-4 and F-6 and Prospectus (together, the “Offering Documents”) issued in connection with the merger of Micro Focus with Hewlett Packard Enterprise Company (“HPE”) and their subsidiaries, pursuant to which Micro Focus combined with the software business segment of HPE (the “Merger”).

<snip>

6. In the Offering Documents used to conduct the Merger, Defendants repeatedly touted Micro Focus’s ability to “enhance shareholder returns,” “accelerate operational effectiveness,” “achieve operational efficiencies,” and “create significantly greater scale and breadth of product portfolio.” In addition, the Offering Documents repeatedly made statements about its successful track record of executing and integrating strategic acquisitions.

7. Defendants, however, failed to disclose a number of problems seriously undermining Micro Focus’s business and prospects. The Offering Documents’ representations were materially untrue, inaccurate, misleading, and/or incomplete because they failed to disclose, inter alia, that, by the time of the issuance of the Offering Documents in August 2017: (a) there were serious and inherent compatibility issues with the Merger of the two companies; (b) the Merger would create insurmountable sales force hurdles including massive attrition; (c) that HPE divisions (such as Autonomy) had lagging products; and (d) because of these issues, the total enterprise value for the Merger was materially inflated and, in fact, laid bare the reckless acquisition strategy undertaken by Micro Focus.

8. In the weeks and months following the completion of the Merger, Micro Focus made a series of announcements which put to lie the representations in the Offering Documents. Indeed, Micro Focus announced revenue declines, lowered guidance, significant sales staff changes, the loss of key personnel, sales execution issues, operational improvement plans, and executive (including CEO) departures. As these facts were disclosed, and as other information concerning the nature and extent of the massive problems facing Micro Focus became public, the price of Micro Focus shares dropped significantly, far below the $28.81 per share Merger closing price. On March 22, 2018, shortly before this consolidated action was filed, the price of Micro Focus ADSs closed at $12.99 per share, representing a decline of more than 54% from the Merger closing price of the ADSs.

https://www.microfocusclassaction.com/Content/Documents/Second Amended Complaint.pdf


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