Gain Capital Investor Asks Court To Block $236M Merger

A Gain Capital shareholder filed a proposed class-action lawsuit in a Delaware federal court last week, seeking to stop Gain’s acquisition by INTL FCStone Inc.

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Adam Franchi claims the New Jersey-based Gain kept shareholders in the dark about various aspects of the $238 million deal. In the lawsuit, filed in U.S District Court for the District of Delaware, Franchi asks the court to stop the acquisition, or reverse if it is executed, plus damages and attorneys’ fees.

Under terms of an agreement announced in late February, INTL FCStone will acquire Gain in an all-cash transaction. Gain’s stockholders will receive $6 per share, representing approximately $236 million in equity value.

In a proxy statement update filed April 10, however, Gain reported “extraordinary levels of volatility” since the proposed deal was announced, particularly in its average daily trading volume.

Gain’s ADV during the post-signing Q1 period was $17.8 billion, a 123% increase from $8 billion, the ADV during the pre-signing Q1 period, and a 131% increase from $7.7 billion, the ADV during the first quarter of 2019.

Gain’s board of directors continue to recommend the deal with INTL FCStone Inc.

‘False And Misleading’

Franchi claimed the proxy statement omits enough information to render it “false and misleading.” For starters, the lawsuit claims Gain failed to disclose key financial data such as
EBITDA, adjusted EBITDA, unlevered free cash flow, and a reconciliation of all non-GAAP to GAAP metrics.

“The disclosure of projected financial information is material because it provides stockholders with a basis to project the future financial performance of a company, and allows stockholders to better understand the financial analyses performed by the company’s financial advisor,” the lawsuit said.

Secondly, the lawsuit claims the proxy statement omits “material information regarding the analyses performed by the Company’s financial advisor in connection with the Proposed Transaction.” All of the data and metrics used in the analysis were not disclosed, the lawsuit claimed.

Thirdly, Franchi claimed the proxy statement does not reveal whether Gain “entered into any confidentiality agreements that contained standstill and/or ‘don’t ask, don’t waive’ provisions that are or were preventing other potential acquirors from submitting offers to acquire the Company.”

GAIN Capital provides trading technology and execution services to retail and institutional investors worldwide, with multiple access points to OTC markets and global exchanges across a wide range of asset classes, including foreign exchange, commodities, and global equities.

The deal is set to be completed in mid-2020, subject to regulatory approvals and other customary closing conditions.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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