Cloudflare’s Restructuring Draws Legal Challenges From Investors

Cloudflare Inc.‘s founders are pushing a capital restructuring that would let them keep control over the software giant while selling down their stakes to as little as 2%, according to a pair of lawsuits.

Two retail shareholders challenged the transaction in Delaware’s Chancery Court, saying in separate filings June 5 that it would give Matthew Prince and Michelle Zatlyn “the best of both worlds” by letting them generate billions in liquidity without weakening their hold on the company.

“The founders can sell approximately $3.6 billion in newly issued Class C shares without having any effect on their voting power,” ...