“Plaintiff has alleged sufficient facts to make a reasonable person question the business wisdom of the Tidal acquisition, but plaintiff has failed to plead that the committee defendants acted in bad faith and thus faced a substantial likelihood of liability for that decision,” she wrote.Dec.

McCormick concluded, however, that the plaintiffs had failed to demonstrate bad faith by members of the transaction committee in approving the deal. The judge also noted that the defendants conceded that Carter, who joined Block’s board as part of the deal, could not be considered impartial. “It is reasonably conceivable that Dorsey used corporate coffers to bolster his relationship with Carter,” wrote McCormick. The deal closed on April 30, with Block paying $237.3 million after adjustments for an 86.23% stake. In early 2021, after Tidal missed its financial forecasts for 2020 and Block’s management reduced its valuation of Tidal to $350 million, Dorsey proposed buying 88% of the company for $309 million. The committee nevertheless instructed management to continue pursuing the deal. A slide presentation noted that Dorsey was the only person advocating strongly for the deal, which had received “substantial push back” from Block’s senior executives. A week later, the committee was presented with another report discussing Tidal’s history of quarterly losses, expiration of artist contracts, and $127 million in accrued liabilities. The report also noted the Norwegian criminal probe and a federal lawsuit by performing artists who said Tidal was withholding royalties they were owed. They included Tidal’s difficulties in attracting subscribers in a market dominated by Spotify, with most of the remaining market share captured by Apple and Amazon. The directors agreed to form a transaction committee while Dorsey drafted and submitted a nonbinding letter of intent to purchase Tidal for $554.8 million.Ī management report to the transaction committee in October 2020 raised several red flags.

By videoconference from the Hamptons, he raised the issue during a Block board meeting. Nevertheless, Dorsey, who is also the co-founder and former CEO of Twitter, began thinking of acquiring Tidal after summering with his friend Carter in the Hamptons in 2020, according to court documents.

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