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Matterport, founded in 2011, has benefited from the COVID-19 pandemic and social distancing as buyers look to shop for homes online instead of going to see them in-person. The company provides software that can be used to create 3D renderings of homes. Prospective buyers can then “visit” the homes virtually, walking through them as if they were there in person. Besides homes, Matterport’s software can also be used to create digital spac matterport representations of office spaces, museums, retail spaces and just about any kind of property. The company said it grew its user base by more than 500% in 2020, while its revenue grew by 87% to $85.9 million that year. The company believes there’s a large total addressive market of more than $1.2 trillion for the digitization of spaces, with less than one percent of space currently digitized and Matterport leading the way.
The provision defined lockup shares as shares held “immediately” following the de-SPAC transaction, but under the logistics of the share transfer, the CEO was not actually issued shares until over 100 days later (Brown v. Matterport, Inc., January 10, 2022, Will, L.). Brown filed a complaint contending that the share trading restrictions were adopted without his consent in violation of Section 202 of the Delaware General Corporation Law. He sought a declaration that the lockup shares provision was unenforceable as to his shares and that he could freely transfer his shares and/or conduct derivative trading without restriction.
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I agree with the plaintiff’s interpretation of the bylaw as it concerns Brown’s shares. The evidence demonstrates that Brown did not hold Matterport Class A shares “immediately following” the transaction under any commonly accepted meaning of that phrase. Matterport, a spatial data firm and the real estate industry’s top progenitor of 3D tours, is set to go public via a merger with Gores Holdings VI, a special purpose acquisition company sponsored by Gore Group, a global asset management firm.
Existing lock-up agreements containing the “immediately following” formulation used in Matterport may not be enforceable against holders who did not exchange their target company shares for SPAC shares reasonably promptly following the closing of the business combination transaction. Brown held only the right to receive Matterport Class A common shares at that time. The evidence 10 demonstrates that Brown was not issued Matterport shares until at least November 5 and 19, 2021-after he sent executed letters of transmittal to Matterport’s transfer agent. Roughly three and a half months elapsed between the business combination closing and the date Brown possessed any Matterport shares.
Brown also brought fiduciary claims against Legacy Matterport’s former directors. The court bifurcated the claims and held an expedited trial on the limited issue of whether Brown was bound by the transfer restrictions. For parties negotiating or considering entering into a future de-SPAC transaction, it is critical to carefully negotiate the scope of the lock-up and any other restrictions on alienation of the shares of the combined company. To avoid ambiguity, it may be preferred to add language clarifying that the restrictions apply to any shares “held by the holders immediately after the effective time or otherwise issued or issuable to the holders in connection with the business combination transaction”.
While target shareholders beneficially own SPAC shares at the effective time of the business combination transaction, they are not legally holders of such shares until any applicable exchange steps are completed. This matter concerns trading restrictions https://xcritical.com/ adopted in connection with a transaction between defendant Matterport Operating, LLC (“Legacy Matterport”) and a special purpose acquisition company . The SPAC adopted amended bylaws imposing the restrictions before the business combination closed.
Brown received equity compensation in the form of stock options granting him the right to purchase 1,350,000 shares of Legacy Matterport. Immediately after the business combination—and not to shares which were issuable at such time but not actually issued for some time because the holder failed to exchange their target company shares. Significantly, in the de-SPAC transaction, Legacy Matterport stockholders did not automatically become Matterport stockholders. Instead, Matterport’s transfer agent would issue Matterport Class A common shares to Legacy Matterport stockholders upon receipt of a letter of transmittal surrendering their Legacy Matterport shares. In February 2021, Matterport Operating, LLC (“Legacy Matterport”) entered into an agreement to merge with a SPAC, Gores Holding VI, Inc. (“Gores”).
In reviewing the relevant provision of the New Matterport bylaws, the Court looked to their plain meaning and found the language to be unambiguous. In particular, the Court found that the common meaning of “immediately”—“without delay”—meant that Brown’s shares, which were received over 100 days after closing, could not be viewed as held “immediately” after closing. On July 22, 2021, the A&R Bylaws became effective when Gores filed an amended certificate of incorporation and the transaction was completed. Legacy Matterport stockholders did not automatically become Matterport stockholders.
Accordingly, it is common for key stockholders of the target company to agree not to transfer their shares of the SPAC for a certain period following the closing, typically 6 or 12 months, subject to certain customary exceptions. These transfer restrictions are often paired with corresponding restrictions on the SPAC’s sponsors, who may be subject to a similar or identical lock-up applicable to their shares, warrants or other securities of the SPAC. These restrictions can project confidence to the market and serve as an incentive for performance, particularly because such restrictions commonly fall away if the combined company’s share price surpasses certain pre-determined price thresholds before the end of the lock-up period. It is unnecessary to define the precise time period that the “immediately following” language covers. The only question presently before the court is how the transfer restrictions apply to the plaintiff.
Matterport Debuts On Nasdaq Via Spac
The plaintiff, a former officer of Legacy Matterport, contends that the restrictions were adopted without his consent in violation of Section 202 of the Delaware General Corporation Law. He also asserts that the challenged bylaw provision does not apply to him by its plain terms. In addition to seeking declaratory relief as to the validity of the restrictions, the plaintiff brings breach of fiduciary claims against Legacy Matterport’s former directors. The court rejected the defendants’ argument that Brown’s reading of the provision would “nullify” the transfer restrictions because no Legacy Matterport stockholder received Matterport shares” instantly after the transaction closed.
Accordingly, I find that Brown does not hold Lockup Shares subject to the transfer restrictions in Section 7.10. This conclusion is the natural consequence of the “deliberate and knowing selection of words for inclusion” in the A&R Bylaws, which the court will not rewrite. Matterport is the latest firm to use a SPAC to make its public debut, in favor of the more traditional initial public offering route. Real estate technology company Opendoor also went public via a merger with a SPAC in late 2020. “We believe the proposed transaction with Gores Holdings VI unlocks the potential of our platform and accelerates our mission to make every building and every space more valuable and accessible,” Matterport CEO RJ Pittman, said in a statement. The merger will give the combined company — which will be listed on the NASDAQ exchange under the ticker symbol “MTTR” — an enterprise value of approximately $2.3 billion and a total equity value of $2.9 billion.
To the extent that any conflicting evidence was presented, I have weighed it and made findings of fact accordingly. Given the limited focus of this decision, the discussion of certain peripheral facts is abbreviated. Where facts are drawn from exhibits jointly submitted by the parties at trial, they are referred to according to the numbers provided on the parties’ joint exhibit list (cited as “JX “) unless defined. Sign up for a free Matterport account with 1 active space, 1 user, and access to a suite of tools. The addition of LiDAR support for iPhone customers to capitalize on Apple’s new depth sensor and increase the fidelity and accuracy of Matterport digital twins. This website is using a security service to protect itself from online attacks.
Be the first to see interesting Spaces, new posts, and special offers. Additional information about the completed Business Combination will be provided in a Current Report on Form 8-K to be filed by Matterport, Inc. with the SEC and available at
- Over his five years at Legacy Matterport, Brown received equity compensation in the form of stock options, granting him the right to purchase 1, 350, 000 shares of Legacy Matterport.
- Instead, at that time he held only the right to receive Matterport Class A common shares.
- The SPAC adopted amended bylaws imposing the restrictions before the business combination closed.
- ”) and the markets in which Matterport operates, business strategies, debt levels, industry environment, potential growth opportunities, the effects of regulations and Gores’ or Matterport’s projected future results.
- Accordingly, it is common for key stockholders of the target company to agree not to transfer their shares of the SPAC for a certain period following the closing, typically 6 or 12 months, subject to certain customary exceptions.
- While target shareholders beneficially own SPAC shares at the effective time of the business combination transaction, they are not legally holders of such shares until any applicable exchange steps are completed.
The defendants assert that Brown’s reading of the provision would “nullify” the transfer restrictions because “no Legacy Matterport stockholder received Matterport shares” instantly after the transaction closed. Delaware law rejects “unreasonable” contractual interpretations that lead to an “absurd result.”But the evidence demonstrates that some Legacy Matterport stockholders would 9 have received their Matterport shares within a few days of closing. That timing could be viewed as consistent with a plain reading of the bylaw.
Matterport To Go Public In $2 3bn Spac Merger Deal
In February 2021, Legacy Matterport agreed to a business combination with Gores Holding VI, Inc., a SPAC. In the proposed de-SPAC merger, Gores would be the surviving entity and would be renamed Matterport, and Legacy Matterport would become a wholly owned subsidiary of Matterport. In July 2021, Gores adopted bylaws in anticipation of the business combination, which imposed transfer restrictions on certain shares of Matterport Class A common stock, referred to as “Lockup Shares.” The transaction was completed and the bylaws became effective. A CEO’s shares in a company acquired by a special purpose acquisition company were not subject to a lockup restriction, the Delaware Court of Chancery held.
In a press release, Gores said its strategy is to identify and complete business combinations with differentiated, market-leading companies with strong equity stories, which will benefit from the growth capital of the public equity markets. The ability of the target company’s insiders to sell their SPAC shares after the merger is a key point of negotiation in any de-SPAC transaction. Concurrently with the consummation of the business combination, additional investors will purchase shares of common stock of Gores Holdings VI in a private placement. Following the closing of the business combination, the Company’s management team, led by Chief Executive Officer RJ Pittman, will continue to operate and manage Matterport. In a typical de-SPAC transaction, a target company combines with the SPAC , and the stock of the target is cancelled and exchanged for the right to receive shares of the SPAC. The issuance of those shares is generally handled by the SPAC’s transfer agent, either directly or pursuant to an exchange agreement and letters of transmittal which must be completed by stockholders .
One of Matterport’s top rivals in the space, GeoCV, shut down nearly two years ago after a patent infringement dispute between the two firms. Gores Holdings VI is the seventh SPAC vehicle affiliated with The Gores Group, a nearly 35-year-old global investment company. To date, the company has completed five other SPAC mergers, including one with United Wholesale Mortgage. Accordingly, the court found that Brown’s Matterport shares were not Lockup Shares under the bylaws and he was therefore permitted to freely trade his Matterport shares and enter into derivative transactions with respect to those shares, without restriction. The court reserved all other issues for the second phase of the litigation.
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The company says it has more than 10 billion square feet of space in its spatial data library, which it says is the largest in the world and growing. The company also said it has digitized millions of buildings in more than 150 countries. The parties submitted post-trial briefing, and I heard post-trial argument on December 21, 2021. The transfer restrictions will expire on or around January 18, 2022. Brown filed his Verified Complaint on July 13, 2021, along with a motion for a temporary restraining order and a motion to expedite. On July 19, 2021, I denied the former because of laches and granted the latter.
Matterport And Gores Holdings Vi Announce Closing Of Business Combination
There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data. In 2020, Matterport expects it will have generated $86 million in revenue, up from $46 million the year prior. The company projects steady year-over-year revenue growth reaching $747 million in 2025. Brown also filed a Verified Second Amended Complaint on November 17, 2021, but it did not amend Count I and the defendants contest whether Brown could amend his previous Complaint as a matter of right. The A&R Bylaws were adopted on July 21, 2021 but did not go into effect until the next day. A near-identical version of the bylaws, which only differed in the naming of the SPAC, was adopted simultaneously with the A&R Bylaws and was effective in the interim.
Matterport announced that it has entered into a “definitive agreement” to go public, and says it will be known as Matterport Inc. when it lists on the NASDAQ exchange under the ticker symbol “MTTR”. The defendants assert that they would have taken discovery on “Brown’s reasons for delaying submitting his letters of transmittal, and Brown’s understanding of the value of the merger consideration he received,” had he raised this argument sooner. In my view, neither issue would change the outcome of this decision, as neither affects the A&R Bylaws’ text.
