Just three business days after PayPal announced it will acquire international money transfer provider, Xoom, for $890 million in an all cash deal, an investigation into the deal has surfaced.
According to a news release posted late yesterday morning (July 6), former U.S. Securities and Exchange Commission attorney Willie Briscoe, along with a securities litigation firm, Powers Taylor LLP, are investigating potential claims against the Xoom’s board of directors. The claims relate to the price of the shares, which the attorneys suggest undervalue what each individual share is actually worth.
The release on the investigation states: “Under the terms of the agreement, Xoom shareholders will only receive $25.00 in cash for each share owned, which is virtually no premium over the 52-week high and significantly lower than at least one analyst’s estimated value of $32.00 per share.”
The firms are encouraging impacted investors with information related to the deal to contact them to determine the “fairness of the proposed transaction.”
“The investigation centers on whether Xoom’s Board of Directors is acting in the shareholders’ best interests, whether the board considered alternatives to the acquisition and whether the board has employed an adequate process to review and act on the proposed transaction. Notably, at least one analyst with Yahoo! Finance believes the true inherent value of the stock could be as high as $32.00,” the release continued.
The news of the acquisition broke July 1, indicating that the decision was approved by the boards of both companies, along with eBay’s board. Once the acquisition closes — which is anticipated to be in the fourth quarter of this year — Xoom will continue to operate as its own service but under PayPal’s umbrella. At $25/share, the acquisition represents a 32 percent markup on Xoom’s three-month, volume-weighted average price, according to the news release on the transaction.
Xoom’s shares surged more than 22 percent on July 1 after the news broke and, as of yesterday at 1:30 p.m. EST, were down less than a percent. The shares, however, held steady into the weekend following the news of the acquisition.
The acquisition is said to be beneficial to both companies in helping create the scale and integrated product set that supports the development of new business models for how money is moved digitally between consumers, businesses and merchants.
“Becoming part of PayPal represents an exciting new chapter for Xoom, which will help accelerate our time-to-market in unserved geographies and expand the ways we can innovate for customers,” John Kunze, president and CEO of Xoom, wrote on July 1. “Being part of a larger, global organization will help us deliver the best possible experience to our customers, while maximizing value for our shareholders.”