Juan Monteverde Explains What Actually Triggers a Shareholder Class Action

A merger announcement gives shareholders plenty of numbers to consider.

There is the price being offered for each share, the premium over the company’s recent trading price, and often an expected date for the transaction to close. The board may also announce that it has approved the deal and plans to recommend it to shareholders.

For Juan Monteverde, founding partner of the New York shareholder rights firm Monteverde & Associates PC, those details are only the beginning of reviewing a transaction.

Much of his work involves looking at what happened before the announcement: how the company was marketed, whether other potential buyers were considered, what interests executives and directors have in the transaction, and what shareholders are told before they’re asked to vote.

A Fair Price Is Not Always a Fair Process

A deal can offer shareholders a premium and still raise questions about how the company arrived at that price.

Juan E. Monteverde has spent much of his career examining that process on behalf of shareholders.

One question may be whether the board seriously considered competing offers. Another may involve how much time shareholders are given to review the transaction. Executive compensation, conflicts of interest, and the information disclosed in the proxy can also become relevant.

The offer price is important, but it doesn’t explain everything that happened during the negotiations that produced it.

That’s why Monteverde’s review doesn’t stop with the number in the merger announcement.

The Warning Signs Worth Watching

Some transactions raise more questions than others.

A short period between the announcement and shareholder vote can leave investors with less time to review a complicated transaction. A proxy that provides little detail about how the sale process unfolded may make it harder to understand what alternatives the board considered.

Potential conflicts can also warrant attention.

An executive or director may have compensation, employment arrangements, accelerated equity awards, or other interests tied to completing the transaction. Those interests don’t automatically mean there is a problem with the deal, but shareholders may reasonably want to understand them before voting.

The same is true when a transaction involves related parties or when the proxy leaves important parts of the negotiations unclear.

None of those circumstances proves that a merger is improper.

They give attorneys reviewing the transaction more to examine.

Class Action or Individual Claim

Shareholders who have concerns about a merger may have different legal options depending on the facts of the transaction, the applicable law, and the nature of the alleged problem.

Some shareholder litigation proceeds on behalf of a larger group of investors who were affected by the same conduct.

That can make sense when many shareholders received the same proxy statement or were affected by the same terms of a transaction. Instead of examining the same alleged disclosure problem separately for each investor, courts may address common issues together when the legal requirements are met.

But a merger complaint doesn’t automatically become a class action.

Courts consider whether the claims meet the requirements to proceed on behalf of a group, including whether the shareholders share relevant legal and factual issues.

Those questions can become part of the case well before the underlying dispute is resolved.

How Monteverde & Associates PC Evaluates a Deal

When a transaction draws the firm’s attention, attorneys at Monteverde & Associates PC review the documents surrounding it.

That can include the merger agreement, proxy statement, and regulatory filings, along with information about how the board evaluated the transaction and what happened during the sale process.

The review may raise straightforward questions.

Were other buyers approached? Were competing offers made? What financial information did the board rely on? Do executives have interests in the transaction that differ from those of other shareholders? Does the proxy explain enough about the negotiations for shareholders to understand how the board reached its decision?

Not every transaction produces the same concerns, and not every review leads to litigation.

For Monteverde, the work is about understanding how the company got from the beginning of the sale process to the deal shareholders are eventually asked to approve.

A Firm Focused on Shareholder Rights

Monteverde litigated mergers and other corporate transactions before starting his own firm.

Before becoming founding partner of Monteverde & Associates PC, he spent six years as a partner and chair of the Mergers and Acquisition Litigation Department at Faruqi & Faruqi LLP.

Earlier, at Levi & Korsinsky, he represented investors in securities and consumer fraud matters.

Those roles gave him years of experience reviewing the documents behind corporate transactions and representing shareholders when questions arose about what they were told or how a deal was handled.

That work eventually became a central focus of Monteverde & Associates PC.

Monteverde’s personal motto is that no one is above the law. In his shareholder practice, that principle applies to the people who negotiate and approve transactions on behalf of investors.

What Happens After a Case Is Filed

Filing a shareholder case doesn’t mean the dispute will ultimately go to trial.

What happens next depends on the claims, the transaction, and when concerns are raised.

Some disputes involve the information shareholders receive before voting. Others continue after the transaction closes and may eventually be resolved through settlement or further litigation.

For Monteverde, examining the process before shareholders vote can be particularly important because there may still be time to address questions about the information they’ve received.

Once a transaction has closed, the circumstances are different.

That makes the period between the announcement and the shareholder vote an important one for investors who want to understand more than the headline terms.

What Shareholders Can Look for in a Merger Proxy

Shareholders don’t have to approach a merger proxy the way a securities attorney would.

They can, however, read beyond the opening summary.

The section describing the background of the merger can show how negotiations developed, whether other potential buyers were involved, and how the board reached its decision. Compensation disclosures can provide information about what executives may receive if the deal closes. Financial analyses can offer more context for the price shareholders are being offered.

The timeline matters, too.

If something in those sections is unclear, shareholders can look further into the filing or seek advice about what it means for their investment.

Juan Monteverde has spent much of his career doing a more detailed version of that work.

When a merger is announced, the offer price is one of the first things he looks at. The next questions are how the company arrived there, what happened along the way, and whether shareholders have been given enough information to evaluate the result for themselves.

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