Pomerantz Appointed Lead Counsel in Avalara Securities Litigation

On February 3, 2023, U.S. Senior District Judge Marsha J. Pechman, of the Western District of Washington, appointed Pomerantz LLP as Lead Counsel on behalf of Martin Sohovich – the Lead Plaintiff, and the class, in Parekh v. Avalara, Inc., 22-cv-1580 (W.D. Wash.). This securities class action alleges that Avalara, Inc. (“Avalara” or the “Company”) misled investors regarding the true value of the Company before a shareholder vote to approve its acquisition by Vista Equity Partners Management, LLC (“Vista”) for $93.50 per share.

Avalara is a SaaS (software as a service) company that provides small and mid-sized businesses with cloud-based solutions for the calculation and management of sales tax and the automation of transaction tax compliance.

Allegations against Avalara include that: (i) the Company created unreasonably low financial projections to achieve support for a fairness opinion regarding its acquisition by Vista; (ii) Avalara directed its financial advisor, Goldman Sachs & Co. LLC (“Goldman Sachs”), to use these low financial projections as the basis for analyzing and producing a fairness opinion; and (iii) Avalara filed a proxy statement (the “Proxy”) with the U.S. Securities and Exchange Commission (the “SEC”) in which it misrepresented the beliefs of the Company’s Board and management regarding the reasonableness of the inappropriately low financial projections in order to mislead shareholders regarding the present value of their shares.

On August 8, 2022, Avalara announced that it had “entered into a definitive agreement to be acquired by Vista… for $93.50 per share in an all-cash transaction valued at $8.4 billion.”

However, in August 2022, analysts had valued Avalara stock in the range of $100-155 per share – without accounting for a transaction premium for the proposed merger – with experts predicting that Avalara shares would reach significantly higher than the $93.50 per share offered in the merger agreement.

Then, on September 12, 2022, in order to boost support among Avalara shareholders for the merger, the Company filed the Proxy in which it stated the low financial projections “w[ere] prepared on a reasonable basis, reflect[ing] the best currently available estimates and judgments, and present[ing], to the best of management’s knowledge and belief, the expected course of action and the expected future financial performance of Avalara” and were “considered reasonable by Avalara’s management as of the date of their preparation.”

On October 14, 2022, Avalara held a shareholder vote in which its merger agreement with Vista was approved at a valuation of $93.50 per share. Notably, 33.8% of Avalara’s shares either voted against approving the merger, abstained from voting, or were not otherwise represented at the vote. The acquisition of the Company by Vista closed five days later on October 19, 2022, resulting in Avalara’s shares being delisted from the New York Stock Exchange.