The Arkansas Teacher Retirement System's board of trustees on Thursday authorized a securities monitoring firm to file a lawsuit in Delaware to force a technology company that develops software for analytics and tracking of website and mobile app usage to hand over certain records.
The securities monitoring firm is Bleichmar Fonti & Auld LLP. The technology company is New Relic Inc.
Bleichmar Fonti & Auld has been investigating a corporate merger involving New Relic Inc., and the Arkansas Teacher Retirement System owned about 94,000 shares of New Relic stock worth about $8 million as of the effective date of the merger, the system's staff said in a memo to the board of trustees.
The Bleichmar law firm has been investigating New Relic because it appears the New Relic board accepted a merger proposal that undervalued New Relic while benefiting certain insiders at the company, according to the system's staff.
"We don't yet know for sure just how much the company was undervalued, but by one estimate the lower merger price deprived ATRS of $750,000," the system staff said in the memo. The system's investments are valued at more than $21 billion. The system has more than 100,000 working and retired members.
As stockholders in New Relic, the system has the right to obtain certain internal company documents related to the merger to assist in the investigation by the Bleichmar law firm, the system's staff said. The staff said the law firm made that request on the system's behalf, but after five months of negotiation New Relic is still refusing to hand over certain documents to which the system is entitled.
After the law firm files a lawsuit in Delaware aimed at forcing New Relic to hand over these records and if the court grants the request, that would allow the system to confirm whether the company was undervalued and whether there is a basis for a larger lawsuit against the company on behalf of all shareholders, the system's staff said.
The Bleichmar law firm and the system's staff recommended authorizing the filing of the lawsuit to obtain the records. The lawsuit won't cost the system any funds, system Executive Director Mark White said.
If the securities monitoring firm believes the system should file a lawsuit to recover investment losses in this case, the system's board of trustees will be asked to authorize such a lawsuit, he said.
Securities monitoring firms represent the system in class-action lawsuits over investments. The firms are paid on a contingency fee basis, with payments determined by a judge and coming out of any settlements and awards. Potentially millions of dollars are at stake in large, complex cases that involve many retirement systems.
A spokesman for New Relic Inc. could not be reached by telephone late Thursday afternoon.
In November, New Relic -- which bills itself as the all-in-one observability platform for every engineer -- announced that Francisco Partners and TPG had completed their all-cash acquisition of New Relic for $87 per share, representing an equity valuation of approximately $6.5 billion.
The acquisition agreement was previously disclosed July 31, 2023, and approved by New Relic stockholders at a special meeting held Nov. 1, 2023, according to a news release.