By Henry Kronk, eLearningInside News. This article was originally posted at news.elearninginside.com
March 13 update. It appears the ordeal is far from over. On March 10, California’s The Shareholders Foundation announced an investigation on the fiduciary duties of the management team; and the subsequent filing of a lawsuit by a group of Instructure investors alleging the violation of securities laws during the takeover process of Instructure by Thoma Bravo. Previously, analyst had mentioned a “high target” for the stock as high as $56. The noticeable margin sheds lights on Goldsmith’s incentives, who walks out of the deal with a parachute no less than $12 million worth.
Instructure Dan Goldsmith announced on February 18 that he plans to leave his role as Chief Executive Officer of the company, along with his position on the board of directors. Goldsmith will remain in his post until March 6. In the meantime, senior Instructure leaders will form a joint office of the CEO as they begin a search to fill the role with the help of a hired firm.
On the same day, Thoma Bravo revised their definitive agreement with Instructure. They will begin a tender offer at some point before February 25 to buy all outstanding Instructure stock at $49.00 a share. After the tender offer is completed, Instructure plans to merge with Thoma Bravo.
Last week, the proposed private equity buyout of Instructure at $47.60 per share by Thoma Bravo failed to earn sufficient shareholder support.
Allegations of conflicts of interest by Instructure’s shareholders
Goldsmith had been criticized by some Instructure shareholders for the private equity acquisition deal by Thoma Bravo, sanctioned and proposed by Instructure’s board. If approved, Goldsmith would have remained in his position as CEO.
As Quoc Tran, investment officer at Lateef Investment Management, told Bloomberg in January, “Goldsmith staying on as CEO seems like a conflict of interest where he’s putting his own interests ahead of shareholders. We don’t think Dan has done a good job with Bridge and this deal rewards him rather than hold him accountable.” At the time, Lateef controlled 1.5% of Instructure stock.
The Thoma Bravo deal involved a private buyout at $47.31 per share. It has been criticized more widely as undervaluing the company and failing to undergo proper processes.
As Praesidium, another Instructure investor that holds a 7.5% stake, wrote in a 13D form filed with the SEC in January, “Not only does the proposed offer represent a more than 10% discount to Instructure’s closing share price of $52.96 on December 3, 2019, the day before the deal was announced, but we have many reasons to believe the Board did not undertake a full and fair sales process to ensure that shareholders receive maximum value for their investment.”
Goldsmith has been CEO at Instructure since June of 2018. In a statement announcing the change in leadership, Executive Chairman and former CEO Josh Coates praised Goldsmith’s work. “The Board of Directors is grateful to Dan for his strategic guidance and leadership during his time at the Company,” Coates said. ”We wish him all the best in his future endeavors.”
Thoma Bravo revises agreement to tender offer
Instructure’s board failed to to gain sufficient support from its investors to approve the deal before the scheduled February 13 vote. The vote was then rescheduled for February 25.
On February 18, however, Thoma Bravo returned with a tender offer to buy all outstanding Instructure shares at $49.00. After the tender offer is finalized, the two entities have planned a second step merger. During this step, all remaining Instructure shares “will be converted into the right to receive the same per share price paid in the tender offer,” according to the press release.
Instructure’s board unanimously approved the measure. Following the announcement of the deal, the shareholder vote on February 25 has been canceled.
The year of Instructure in the eyes of eLearning Inside News
- March: Instructure Unveils New Teacher Professional Development Service, Canvas Practice
- July: Instructure Eyes Adaptive Personalized Learning, But CEO Dan Goldsmith Says They’ll Follow Their Community’s Lead
- December: Instructure Agrees to $2 Billion Acquisition by Private Equity Firm Thoma Bravo
- February 13: Instructure Investors Block Thoma Bravo Acquisition: Report