Self-Driving Car Company Zoox Sued Over $1.3 Billion Amazon Deal

Aug. 19, 2020, 8:55 PM

Zoox Inc. was sued for records in Delaware by a shareholder looking to probe claims that the self-driving vehicle company’s board and top executives used the Covid-19 pandemic as a pretext to engineer a $1.3 billion proposed sale to Amazon on self-dealing terms.

The share of the proceeds going to public investors is “dwarfed” by the bonuses and Amazon stock rights earmarked for company leadership, the Chancery Court complaint says. “Zoox insiders, directors, and fiduciaries are attempting to divert the lion’s share” to themselves, it adds.

The lawsuit, made public Wednesday, accuses Zoox backers affiliated with Threshold Ventures and Blackbird Ventures—which is run by the Australian billionaire Mike Cannon-Brookes—of using the cash crunch caused by the coronavirus to justify an underpriced sale in exchange for personal perks.

In fact, they began shopping the tech company in December, and by the time they agreed to the Amazon deal, they’d received four indications of interest, according to the complaint. But they allegedly kept key details about those proposals from shareholders.

A term sheet the company signed with Amazon in early May “prematurely ended the sale process” by imposing a six-week negotiating exclusivity period, which “incentivized Zoox insiders to complete a deal with Amazon and Amazon alone,” the suit says.

Before the exclusivity period expired, they’d done so, apparently without receiving an independent fairness opinion, according to the complaint.

The deal also allegedly includes an indemnification provision requiring Zoox shareholders to cover the cost to Amazon of defending against any legal claims they themselves might bring.

“The more fraudulent the conduct by insiders and the more undervalued the deal, the board claims that stockholders may be required to pay even more to Amazon,” the suit says. “That is illogical and unfair.”

It invokes a Delaware law giving corporate shareholders broad records inspection rights if they credibly suspect board wrongdoing. Zoox’s internal files are needed to investigate the deal, according to the complaint.

The suit was originally filed under seal Aug. 13.

Cause of Action: Section 220 of the Delaware General Corporation Law.

Relief: An order requiring the company to turn over relevant records; costs and fees.

Response: Zoox declined to comment Wednesday.

Attorneys: The plaintiffs are represented by Friedlander & Gorris PA and Robbins Geller Rudman & Dowd LLP.

The case is Wei v. Zoox, Inc., Del. Ch., No. 2020-0666, complaint unsealed 8/19/20.

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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