Avantax hit with shareholder suit alleging merger misinformation


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.

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