Schwab agreed to acquire TD Ameritrade in November in a deal valued at around $26 billion. Under that deal, TD Ameritrade stockholders will receive Schwab shares in exchange for their TD Ameritrade shares at a 17% premium over the 30-day volume weighted average price exchange ratio as of November 20, 2019.
This week, lawyers for Michael Kent filed a lawsuit before the U.S. District Court in Delaware alleging the Form S-4 Registration Statement the companies filed with the SEC on March 10 “omits material information” about the two firms’ financial projections and cash flow analysis, and therefore renders the statement “false and misleading.”
Lawyer Richard Maniskas filed the class action lawsuit on behalf of Kent and “hundreds, if not thousands” of TD Ameritrade stockholders. There were around 541 million shares of TD Ameritrade stock outstanding as of Nov. 18, 2019, according to the lawsuit.
Kent’s lawsuit — which names TD Ameritrade, Charles Schwab and TD Ameritrade’s board members as defendants — is seeking to preliminarily and permanently enjoin the merger, or, if the deal is consummated, to rescind it, and to order the defendants to correct the registration statement.
In addition, the suit seeks an award of lawyers’ and experts’ fees and costs and any further relief deemed just and proper by the court.
In January, the companies announced in their SEC filings that the U.S. Department of Justice was conducting a second anti-trust review of the merger, as reported.
Tom Nally, president of TD Ameritrade Institutional, said at a conference in January that the DOJ’s examination was not surprising given the size of the deal. He said then that the deal was still expected to close in the second half of 2020. A Schwab spokesman told FA-IQ at the time that the DOJ request wasn’t surprising, given the scope of the merger.
If finalized, the merger would create a brokerage with around 24 million accounts and $5.1 trillion in client assets.
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