ICYMI: What You Should Know About The Oracle Shareholder Lawsuit

Tech giant Oracle Corporation ORCL acquired NetSuite for $9.3 billion back in 2016, and a recently approved shareholder lawsuit accuses company executives of breaching their duties in approving the deal, Reuters reported Monday.

What Happened

Oracle co-founder Larry Ellison happened to be an earlier financier of NetSuite and owned close to 40% of the company.

Oracle was looking to increase its exposure to the fast-growing cloud market in 2016 and viewed NetSuite as a means to build out its cloud business at a faster pace than if it were to develop a new business line internally.

One year after the acquisition, the Firemen's Retirement System of St. Louis took legal action against Oracle and argued the $9.3-billion price tag is a huge premium that personally benefited Ellison.

The legal action took a step forward Aug. 15 after three members of Oracle's board approved a "derivative suit" as part of the Special Litigation Committee. Both Ellison and Oracle CEO Safra Catz are personally named in the shareholder lawsuit.

Why It's Important

The D&P Diary, a blog that focuses on officers and directors liability, said it's not uncommon for boards facing derivative lawsuits to appoint a special litigation committee.

"These committees typically will either recommend that the claims be dropped or will conclude that the claims have merit and opt to use its own lawyers to pursue the claim."

In Oracle's case, it is highly unusual for the committee to conclude that the legal action should proceed with the original shareholder filing the claim taking the lead. 

What's Next

The Special Litigation Committee also stated in its Aug. 15 letter it believes a "settlement of the claims would be the best result for Oracle."

It is unclear if a settlement can be reached or when the next step in the legal process will occur.

Oracle shares were down 2.02% at $52.11 at the time of publication Friday. 

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Larry Ellison photo by Oracle via Wikimedia.