AS Roma Owners Blast Squeeze-Out Suit Over Coronavirus Financing

James Pallotta, the billionaire co-owner of the Boston Celtics and Italy’s AS Roma pro soccer club, fired back at a Delaware lawsuit by minority investors in the soccer team’s parent company, who are challenging financing efforts aimed at keeping it afloat during the Covid-19 pandemic.

“The scattershot amended complaint is nothing more than an attempt by disgruntled members of the company” to “accuse defendants of wrongdoing without any basis in fact or law,” Pallotta and his affiliates say in a partly redacted Chancery Court filing made public Thursday.

In addition to Pallotta—who also co-owns Fnatic, a leading eSports franchise—the lawsuit by several private equity investors targets his Raptor Group investment firm, the general partner of the holding company that controls AS Roma, and various affiliates.

The suit accuses them of restructuring loans to the holding company as equity interests with top payout priority if they sell the team. They allegedly plan to retroactively reclassify the loans in connection with a financing round that would create a new category of “class C” units.

That would badly dilute minority investors in the event of a sale, according to the April complaint.

In their motion to dismiss the case, Pallotta and his affiliates say it’s “either moot or unripe” because they abandoned the original financing transaction in favor of a new one and because the team hasn’t been sold.

The funding will help AS Roma survive after “the club’s matches were canceled, the player trading market collapsed,” an auction for game broadcasting rights was delayed, and the team’s “ongoing sale process” was “abruptly stalled” when Italy became a coronavirus “epicenter,” the filing says.

Although the plaintiffs amended their suit to claim critical information was withheld before the new financing round—and that insiders participating in the transaction had access to it—they really just want to know how likely the team is to be sold, according to Pallotta.

“Fiduciaries cannot foresee the future,” the dismissal motion says, “and the information plaintiffs demand would be pure speculation.”

The fact that 80% of investors took part in the financing round belies the claim that more information was needed, according to the filing.

The loan restructuring also didn’t involuntarily dilute any investors because they were all invited to participate, according to the motion. That makes the suit derivative, rather than direct, and the plaintiffs failed to show it would have been futile to demand an internal investigation before suing, the filing says.

Pallotta and his affiliates are represented by DLA Piper LLP. The plaintiffs are represented by Bayard PA and Mandel Bhandari LLP.

The case is Feldman v. AS Roma SPV GP LLC, Del. Ch., No. 2020-0314, motion to dismiss filed 8/13/20.