Avantax hit with shareholder suit alleging merger misinformation

Avantax hit with shareholder suit alleging merger misinformation
The failure to make adequate disclosures is a violation of federal securities laws, according to the complaint.
OCT 30, 2023

A stockholder in Avantax Inc., which is being acquired by the giant broker-dealer network Cetera Holdings Inc., last week sued Avantax, claiming that its board of directors had approved the filing of a proxy statement that had incorrect information about the merger and potentially could harm investors.

One of those named in the complaint is Christopher Walters, Avantax CEO and a member of the board, who could walk away from the deal with a golden parachute worth $21.6 million, according to the proxy statement that is now being questioned in court.

In September, Cetera said it intended to buy Avantax, which specializes in CPAs and tax-focused financial advisors, for $1.2 billion, or $26 per share. Weeks later, it filed its initial proxy statement, which included a number of facts about the deal that shareholders would need to inform their vote on whether to approve the merger or not.

And that's where Avantax fell short, according to the investor complaint, which was filed last Thursday in federal court in Delaware by Brian Jones.

According to the complaint, the proxy statement, which recommends that Avantax stockholders vote their shares in favor of the acquisition, "contains materially incomplete and misleading information concerning, among other things: the company’s financial projections; the financial analyses that support the fairness opinion provided by the company’s financial advisor, PJT Partners; and potential conflicts of interest faced by company insiders."

The failure to make adequate disclosures is a violation of federal securities laws, according to the complaint.

Shareholders are scheduled to vote on Cetera's purchase of Avantax Nov. 21.

A spokesperson for Avantax did not return a call Monday morning to comment. A spokesperson for Cetera also did not return a call Monday to comment.

Cetera Holdings is the parent of Cetera Financial Group, a giant network of broker-dealers with 9,000 financial advisors and $341 billion in client assets. Avantax’s 3,100 financial advisors work with $83.8 billion in client assets.

According to the complaint, the proxy allegedly failed to disclose the line items underlying the calculation of adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization; unlevered free cash flow; and non-GAAP earnings per share.

Economy will land softly unless oil prices spike, says Ameriprise chief economist

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.