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Details and Background - Micro Focus shareholder class action settlement
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This is a supplement to our page on the settlement: Micro Focus Stock Suit.
"I sold the Sep 2017 ADRs in Nov 2017 for a small gain. I will not receive any part of the settlement."
"I wonder if the work needed to pull this together is worth it."
"This settlement is for the institutional shareholders -- mutual funds, asset managers, brokers, pension plans, etc. -- who either own or administer some 80% of HP and HPE stock."
"Don't spend it all in one place!"
Details of the class action:
The case refers to the Sep 1, 2017 spinoff of several HPE software businesses to the British software company Micro Focus.
In 2018, five investors and a pension fund sued Micro Focus, HPE, and several Micro Focus officers and board members in California and federal courts.
"This Action alleges, among other things, that Defendants misrepresented and omitted material facts in the registration statements and prospectus associated with the merger of Micro Focus and the software business segment of HPE, which took place in September 2017."
"If you received Micro Focus ADSs or ADRs in connection with the September 2017 Merger, or otherwise purchased or acquired ADSs or ADRs, or the right to receive such ADSs or ADRs, between September 1, 2017 and August 28, 2019, inclusive, you are a Settlement Class Member..."
"The total amount of the Settlement is $107.5 million... Defendants deny that they have violated any aspects of the securities laws of the United States, and there has been no finding of liability or wrongdoing by, on the part of, or against, any Defendant... This notice is not intended to express any opinion by the Court with respect to the truth of the allegations..."
Stock history dates:
- Sep 1, 2017 -- 0.137 MFGP "A" American Depositary Share issued for each HPE share. The 222 million MFGP shares were valued at $29.34/share.
- Apr 30, 2019 -- "Return of value" transaction. When Micro Focus sold the SUSE Linux business, you received 0.8296 new MFGP "B" shares plus $4.30 cash, replacing each original "A" share.)
- Jan 31, 2023 -- Micro Focus was purchased for cash by Canadian OpenText for 532 UK pence (approx. US$6.43) per "B" share. (You have a potential claim even if you held MFGP until the purchase by OpenText.)
The case has been ongoing for five years and involved millions of pages of documents and 21 depositions. The "Stipulation of Settlement" lists 23 lawyers -- from San Diego to New York -- representing the six plaintiffs.
"Class Counsel will apply for an attorneys’ fee award for Plaintiffs’ Counsel in an amount of up to one-third of the Settlement Fund... ...To date, Plaintiffs’ Counsel have not received any compensation for their efforts, nor have they received any payment for the expenses or charges they have incurred in pursuing the claims. The attorneys’ fees and expenses requested will be the only payment to Plaintiffs’ Counsel for their efforts in achieving this Settlement and for their risk in undertaking this representation on a wholly contingent basis..."
"The calculation of each Loss Amount will depend upon several factors, including when Micro Focus ADSs/ADRs were purchased or otherwise acquired and in what amounts, as well as whether those securities were ever sold, and, if so, when they were sold and for what amounts..."
"This 'Allocation' section of this Notice has been prepared by Plaintiffs... Defendants take no position on the Plan of Allocation or the views expressed by Plaintiffs..."
Very rough estimate of your payout: Discussed on the HPAA Finance Forum
This calculation makes lots of assumptions...
- Micro Focus issued 222 million "A" ADSs to HPE shareholders. Micro Focus 2018 Annual Report
- Assuming total class action settlement shareholder payout of $70 million -- if the court approves the proposed settlement plan in June, which is extremely likely.
- Assuming that every claimant gets the same per-share portion of the total settlement (not the case, because of differences in when MFGP ADSs were acquired and sold by each shareholder.)
- Assuming that claims are filed for 80% of the ADSs.
Then $70M / (222M ADSs* 80%) = $0.39 per MFGP "A" ADS.
For every 100 HPE shares you owned on Sep 1, 2017, you received 13.7 MFGP ADSs. (Remember that back on Oct 21, 2015, you received one share of HPE for every HPQ share you owned.)
Therefore, a very rough estimate of the average payout would be $5.30 for every 100 HPE shares owned on Sep 1, 2017. (13.7 * $0.39)
period typically is the time frame during which it is
believed that alleged fraud or other securities law
violations artificially inflated the
"It is not necessary for you to retain ownership of the stock after the class period has expired to participate in the lawsuit. ...
"While the best evidence of ownership are the
confirmation slips received when the stock was
purchased, you may also use your brokerage
"The maximum possible recovery, which rarely is attained, is the amount of loss attributable to the illegal conduct, less attorneys’ fee and costs. ..."
--from a major law firm in the securities class action business.
Reuters article "Micro Focus shareholders grapple
over settlement in merger lawsuit"
Feb 9, 2023: Press release from one of the lead law firms “This is a particularly interesting case in light of its procedural posture... It was a tough case...”
Feb 28, 2023: "Micro Focus Settles Suit Alleging It
Botched HPE Purchase For $107.5 Million"
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