Del. Court Dismisses Shareholder Suit Challenging Block’s $306M Tidal Buy
The Delaware Chancery Court granted Block’s motion for dismissal of a breach of fiduciary duty complaint brought by a Block shareholder, the City of Coral Springs (Florida) Police Officers’ Pension Plan, against CEO Jack Dorsey and his board challenging Block’s…
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$306 million buy of Tidal, the music streaming service associated with Jay-Z. During its due diligence, a transaction committee formed by the Block board to consider the proposed Tidal acquisition learned Tidal “was failing financially, losing its major contracts, and facing an ongoing criminal investigation,” said the memorandum opinion (docket 2022-0091) Tuesday written by Chancellor Kathaleen McCormick. The committee also learned Jay-Z personally loaned Tidal $50 million to help the troubled company through its difficulties and that Dorsey, the former Twitter CEO, was the sole Block management member in support of the acquisition, it said. “Despite the obvious problems with the deal, the committee approved the transaction for $306 million,” it said: “It seemed, by all accounts, a terrible business decision.” But under Delaware law, “a board comprised of a majority of disinterested and independent directors is free to make a terrible business decision without any meaningful threat of liability, so long as the directors approve the action in good faith,” said the memorandum opinion.