(Bloomberg) — The chief executive officer of Cybereason Inc. sued two investors — former Treasury Secretary Steven Mnuchin and the SoftBank Vision Fund — accusing them of putting the company at risk of bankruptcy by rejecting multiple plans for a much-needed capital infusion of as much as $150 million.
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Using their voting rights as board members, the two investors “systematically rejected financing proposals, solely to preserve their control and financial advantages,” CEO Eric Gan said in a complaint filed Monday in Delaware Chancery Court. Gan said the cybersecurity-software maker will be forced into Chapter 11 bankruptcy if immediate financing isn’t secured.
Gan and his family office own about 6.8% of the company’s shares, while Mnuchin’s investment firm Liberty Strategic Capital has about 6.6%, and SVF owns about 20%, according to the suit. Both Mnuchin and SVF director Daniela Llobet, who was also named as a defendant, sit on the Cybereason board.
“We firmly believe this lawsuit has no merit and will vigorously defend ourselves against these claims,” a spokesperson for SVF said in a statement. SVF is a segment of SoftBank Group Corp., which Gan said in the lawsuit holds about 31% of Cybereason’s outstanding stock.
A Liberty spokesperson, in a statement Tuesday, said “the lawsuit is completely without merit.”
Debt Due
Cybereason has a debt with JPMorgan Chase & Co. coming due March 11, and Gan has proposed a plan to raise $150 million, according to the suit. But Mnuchin and Llobet opposed it and have refused to approve the last 13 management proposals to raise money, the complaint alleged. Their refusal “to consider financing proposals from sources other than themselves has led to turmoil among the members of the board,” according to the lawsuit.
Former SoftBank Corp. CEO and current SoftBank Group board member Ken Miyauchi, who is the company’s nominee on the Cybereason board, “has expressed dismay over the conduct of SVF and Liberty directors,” according to the lawsuit. But Miyauchi refused to attend board meetings because of internal conflicts, according to the complaint.
The lawsuit alleged that Liberty and SVF proposed a financing that would have deliberately excluded management and further concentrate power in the hands of Liberty and SVF. The expired, non-binding term sheet also contained an “exclusivity provision” to limit Cybereason to raising capital from only Liberty, SVF and two “strategic investors,” according to the complaint.
