Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 1 of 18
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`BETSY C. MANIFOLD (SBN 182450)
`RACHELE R. BYRD (SBN 190634)
`MARISA C. LIVESAY (SBN 223247)
`BRITTANY N. DEJONG (SBN 258766)
`WOLF HALDENSTEIN ADLER
` FREEMAN & HERZ LLP
`750 B Street, Suite 1820
`San Diego, CA 92101
`Telephone: (619) 239-4599
`Facsimile: (619) 234-4599
`manifold@whafh.com
`byrd@whafh.com
`livesay@whafh.com
`dejong@whafh.com
`
`Attorneys for Plaintiff
`[Additional Counsel on Signature Page]
`
`
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`
`
`Case No.
`
`
`
`COMPLAINT FOR VIOLATIONS OF
`SECTIONS 14(a) AND 20(a) OF THE
`SECURITIES EXCHANGE ACT OF
`1934
`
`DEMAND FOR JURY TRIAL
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`ELAINE WANG,
`
`
`Plaintiff,
`
`
`v.
`
`SLACK TECHNOLOGIES, INC., ANDREW
`BRACCIA, STEWART BUTTERFIELD,
`EDITH COOPER, SARAH FRIAR, SHEILA
`JORDAN, MIKE MCNAMARA, JOHN
`O’FARRELL, and GRAHAM SMITH,
`
`
`
`
`Defendants.
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`

`

`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 2 of 18
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`Plaintiff Elaine Wang (“Plaintiff”), by her attorneys, makes the following allegations
`against Slack Technologies, Inc. (“Slack” or the “Company”) and the members of the board of
`directors of Slack (the “Board” or “Individual Defendants,” along with Slack, collectively referred
`to as the “Defendants”), for their violations of Sections 14(a) and 20(a) of the Securities
`Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78n(a), 78t(a), SEC Rule 14a-9, 17
`C.F.R. 240.14a-9, and Regulation G, 17 C.F.R. § 244.100 in connection with the proposed
`acquisition (the “Proposed Transaction”) of Slack by affiliates of salesforce.com, inc.
`(“Salesforce”). The allegations in this complaint are based on the personal knowledge of Plaintiff
`as to herself and on information and belief (including the investigation of counsel and review of
`publicly available information) as to all other matters stated herein.
`INTRODUCTION
`1.
`This is an action brought by Plaintiff to enjoin a transaction whereby Skyline
`Strategies I Inc., a Delaware corporation and direct wholly owned subsidiary of Salesforce
`(“Merger Sub I”) will merge with and into Slack, with Slack continuing as the surviving
`corporation as a direct wholly owned subsidiary of Salesforce, immediately followed by a second
`merger of the surviving corporation into either Skyline Strategies II LLC (“Merger Sub II”) or
`Salesforce, with either Merger Sub II or Salesforce continuing as the surviving company
`(“Proposed Transaction”). Pursuant to the Merger Agreement, Slack shareholders will receive
`$26.79 in cash and 0.0776 shares of Salesforce common stock for each share of Slack common
`stock owned (the “Merger Consideration”). The Board has unanimously recommended to the
`Company’s stockholders that they vote for the Proposed Transaction at the special meeting of the
`Slack shareholders.
`2. To convince Slack stockholders to vote in favor of the Proposed Transaction, on
`December 23, 2020, the Board authorized the filing of a materially incomplete and misleading
`Registration Statement on Form S-4 (the “Registration Statement”) with the Securities and
`Exchange Commission (“SEC”). The Registration Statement violates Sections 14(a) and 20(a) of
`the Exchange Act by noncompliance with Regulation G and SEC Rule 14a-9 (17 C.F.R. §
`244.100 and 17 C.F.R. § 240.14a-9, respectively).
`
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`- 1 -
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`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 3 of 18
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`3. Defendants have failed to disclose certain material information necessary for Slack
`stockholders to properly assess the fairness of the Proposed Transaction, thereby violating SEC
`rules and regulations and rendering certain statements in the Registration Statement materially
`incomplete and misleading.
`4.
`In particular, the Registration Statement contains materially incomplete and
`misleading information concerning the financial forecasts for the Company prepared and relied
`upon by the Board in recommending to the Company’s stockholders that they vote in favor of the
`Proposed Transaction. The same forecasts were used by Slack’s financial advisors, Qatalyst
`Partners LP (“Qatalyst”) and Goldman Sachs & Co. LLC (“Goldman Sachs”), in conducting their
`valuation analyses in support of their fairness opinions. The Registration Statement also contains
`materially incomplete and misleading information concerning certain financial analyses
`performed by the financial advisors.
`5. The material information that has been omitted from the Registration Statement
`must be disclosed prior to the forthcoming stockholder vote in order to allow the stockholders to
`make an informed decision regarding the Proposed Transaction.
`6.
`For these reasons, and as set forth in detail herein, Plaintiff asserts claims against
`Defendants for violations of Sections 14(a) and 20(a) of the Exchange Act, based on Defendants’
`violations of Regulation G and Rule 14a-9. Plaintiff seeks to enjoin Defendants from holding the
`stockholders vote on the Proposed Transaction and taking any steps to consummate the Proposed
`Transaction unless, and until, all material information discussed below is disclosed to Slack
`stockholders sufficiently in advance of the vote on the Proposed Transaction or, in the event the
`Proposed Transaction is consummated without corrective disclosures, to recover damages
`resulting from Defendants’ violations of the Exchange Act.
`JURISDICTION AND VENUE
`7. This Court has subject matter jurisdiction pursuant to Section 27 of the Exchange
`Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question jurisdiction) as Plaintiff alleges
`violations of Section 14(a) and 20(a) of the Exchange Act.
`8. This Court has personal jurisdiction over each defendant named herein because
`
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`- 2 -
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`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 4 of 18
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`each defendant is either a corporation that does sufficient business in California or an individual
`who has sufficient minimum contacts with California to render the exercise of jurisdiction by the
`California courts permissible under traditional notions of fair play and substantial justice.
`9. Venue is proper in this District under Section 27 of the Exchange Act, 15 U.S.C.
`§ 78aa, as well as under 28 U.S.C. § 1391, because Slack is headquartered in this District.
`PARTIES
`10. Plaintiff has owned the common stock of Slack since prior to the announcement of
`the Proposed Transaction herein complained of and continues to own this stock.
`11. Slack is a corporation duly organized and existing under the laws of Delaware and
`maintains its principal offices at 500 Howard Street, San Francisco, California 94105. Slack is,
`and at all relevant times hereto was, listed and traded on the New York Stock Exchange under the
`symbol “WORK.”
`12. Defendant Andrew Braccia has been a member of the Board since March 2010.
`13. Defendant Stewart Butterfield has been a member of the Board since February 2009
`and is also a Co-Founder, Chairperson, and Chief Executive Officer of the Company.
`14. Defendant Edith Cooper has been a member of the Board since January 2018.
`15. Defendant Sarah Friar has been a member of the Board since March 2017.
`16. Defendant Sheila Jordan has been a member of the Board since September 2019.
`17. Defendant Mike McNamara has been a member of the Board since December 2019.
`18. Defendant John O’Farrell has been a member of the Board since April 2011.
`19. Defendant Graham Smith has been a member of the Board since December 2018.
`20. The Defendants referred to in paragraphs 12-19 are collectively referred to herein as
`the “Individual Defendants” and/or the “Board.”
`21. The Defendants referred to in paragraphs 11-19 are collectively referred to herein as
`the “Defendants.”
`
`SUBSTANTIVE ALLEGATIONS
`
`The Proposed Transaction
`22. On December 1, 2020, Slack and Salesforce jointly announced that it had entered
`
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`- 3 -
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`

`

`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 5 of 18
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`into the Agreement and Plan of Merger (the “Merger Agreement”):
`
`SAN FRANCISCO--(BUSINESS WIRE)-- Salesforce (NYSE: CRM), the global
`leader in CRM, and Slack Technologies, Inc. (NYSE: WORK), the most
`innovative enterprise communications platform, have entered into a definitive
`agreement under which Salesforce will acquire Slack. Under the terms of the
`agreement, Slack shareholders will receive $26.79 in cash and 0.0776 shares of
`Salesforce common stock for each Slack share, representing an enterprise value of
`approximately $27.7 billion based on the closing price of Salesforce’s common
`stock on November 30, 2020.
`
`Combining Slack with Salesforce Customer 360 will be transformative for
`customers and the industry. The combination will create the operating system for
`the new way to work, uniquely enabling companies to grow and succeed in the
`all-digital world.
`
`"Stewart and his team have built one of the most beloved platforms in enterprise
`software history, with an incredible ecosystem around it,” said Marc Benioff,
`Chair and CEO, Salesforce. “This is a match made in heaven. Together,
`Salesforce and Slack will shape the future of enterprise software and transform
`the way everyone works in the all-digital, work-from-anywhere world. I’m
`thrilled to welcome Slack to the Salesforce Ohana once the transaction closes.”
`
`“Salesforce started the cloud revolution, and two decades later, we are still
`tapping into all the possibilities it offers to transform the way we work. The
`opportunity we see together is massive,” said Stewart Butterfield, Slack CEO and
`Co-Founder. “As software plays a more and more critical role in the performance
`of every organization, we share a vision of reduced complexity, increased power
`and flexibility, and ultimately a greater degree of alignment and organizational
`agility. Personally, I believe this is the most strategic combination in the history
`of software, and I can’t wait to get going.”
`
`Acquisition to Create the Operating System for the New Way to Work
`The events of this year have greatly accelerated the move by companies and
`governments to an all-digital world, where work happens wherever people are—
`whether they’re in the office, at home or somewhere in between. They need to
`deliver connected experiences for their customers across every touchpoint and
`enable their employees to work seamlessly wherever they are.
`
`Together, Salesforce and Slack will give companies a single source of truth for
`their business and a unified platform for connecting employees, customers and
`partners with each other and the apps they use every day, all within their existing
`workflows.
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`- 4 -
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`

`

`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 6 of 18
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`Slack to Become the New Interface for Salesforce Customer 360
`Salesforce is the #1 CRM that enables companies to sell, service, market and
`conduct commerce, from anywhere. Slack brings people, data and tools together
`so teams can collaborate and get work done, from anywhere. Slack Connect
`extends the benefits of Slack to enable communication and collaboration between
`a company's employees and all its external partners, from vendors to customers.
`
`Slack will be deeply integrated into every Salesforce Cloud. As the new interface
`for Salesforce Customer 360, Slack will transform how people communicate,
`collaborate and take action on customer information across Salesforce as well as
`information from all of their other business apps and systems to be more
`productive, make smarter, faster decisions and create connected customer
`experiences.
`
`Slack To Expand Enterprise Footprint as Part of the World’s #1 CRM
`Slack serves leading organizations in every industry around the world, from the
`fastest growing startups to Fortune 500 companies, such as Starbucks, Target and
`TD Ameritrade, along with leading academic institutions, non-profits, and
`governments in more than 150 countries.
`
`As part of the world’s #1 CRM, Slack will be able to expand its presence in the
`enterprise, not just among Salesforce customers, but for any company undergoing
`digital transformation. Upon the close of the transaction, Slack will become an
`operating unit of Salesforce and will continue to be led by CEO Stewart
`Butterfield.
`
`Combination to Form the Largest Open Ecosystem of Apps and Workflows
`for Business
`Connecting people and data across systems, apps and devices is one of the biggest
`challenges companies face in today’s all-digital world.
`
`Slack’s open platform seamlessly integrates with more than 2,400 apps that
`people use to collaborate, communicate and get work done. With the largest
`enterprise app ecosystem, the Salesforce platform is the easiest way to build and
`deliver apps to connect with customers in a whole new way.
`
`Together, Salesforce and Slack will create the most extensive open ecosystem of
`apps and workflows for business and empower millions of developers to build the
`next generation of apps, with clicks not code.
`
`Details on the Proposed Transaction
`The board of directors of each of Salesforce and Slack have approved the
`transaction and the Slack board recommends that Slack stockholders approve the
`transaction and adopt the merger agreement. The transaction is anticipated to
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 7 of 18
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`close in the second quarter of Salesforce’s fiscal year 2022, subject to approval by
`the Slack stockholders, the receipt of required regulatory approvals and other
`customary closing conditions.
`
`Salesforce has also entered into a voting agreement with certain stockholders of
`Slack common stock, under which each such stockholder has agreed to vote all of
`their Slack shares in favor of the transaction at the special meeting of Slack
`stockholders to be held in connection with the transaction, subject to certain terms
`and conditions. The Slack shares subject
`to
`the agreement represent
`approximately 55% of the current outstanding voting power of the Slack common
`stock.
`
`Salesforce expects to fund the cash portion of the transaction consideration with a
`combination of new debt and cash on Salesforce’s balance sheet. Salesforce has
`obtained a commitment from Citigroup Global Markets Inc., Bank of America,
`N.A. and JPMorgan Chase Bank, N.A. for a $10.0 billion senior unsecured 364-
`day bridge loan facility, subject to customary conditions.
`
`About Salesforce
`Salesforce, the global CRM leader, empowers companies of every size and
`industry to digitally transform and create a 360° view of their customers. For
`more information about Salesforce (NYSE: CRM), visit: www.salesforce.com.
`
`Any unreleased services or features referenced in this or other press releases or
`public statements are not currently available and may not be delivered on time or
`at all. Customers who purchase Salesforce applications should make their
`purchase decisions based upon features that are currently available. Salesforce has
`headquarters in San Francisco, with offices in Europe and Asia, and trades on the
`New York Stock Exchange under the ticker symbol "CRM." For more
`information please visit https://www.salesforce.com, or call 1-800-NO-
`SOFTWARE.
`
`About Slack
`Slack has transformed business communication. It’s the leading channel-based
`messaging platform, used by millions to align their teams, unify their systems,
`and drive their businesses forward. Only Slack offers a secure, enterprise-grade
`environment that can scale with the largest companies in the world. It is a new
`layer of the business technology stack where people can work together more
`effectively, connect all their other software tools and services, and find the
`information they need to do their best work. Slack is where work happens.
`
`Slack and the Slack logo are trademarks of Slack Technologies, Inc. or its
`subsidiaries in the U.S. and/or other countries. Other names and brands may be
`claimed as the property of others.
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`- 6 -
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`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 8 of 18
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`Advisors
`BofA Securities, Inc. is serving as exclusive financial advisor to Salesforce and
`Wachtell, Lipton, Rosen & Katz and Morrison & Foerster LLP are serving as
`legal counsel to Salesforce. Qatalyst Partners LP and Goldman Sachs & Co LLC
`are serving as financial advisors to Slack. Latham & Watkins LLP and Goodwin
`Procter LLP are serving as legal counsel to Slack.
`
`The Materially Misleading and Incomplete Solicitation Statement
`23.
`On December 23, 2020, Defendants caused the Registration Statement to be filed
`with the SEC in connection with the Proposed Transaction. The Registration Statement solicits
`the Company’s shareholders to vote in favor of the Proposed Transaction. Defendants were
`obligated to carefully review the Registration Statement before it was filed with the SEC and
`disseminated to the Company’s shareholders to ensure that it did not contain any material
`misrepresentations or omissions. However, the Registration Statement misrepresents and/or
`omits material information that is necessary for the Company’s shareholders to make an informed
`decision concerning whether to vote in favor of the Proposed Transaction, in violation of Sections
`14(a) and 20(a) of the Exchange Act.
`Financial Forecasts
`24.
`The Registration Statement discloses tables for forecasts for Slack (the
`“Projections”). However, the Registration Statement fails to provide material information
`concerning these Projections, which were developed by the Company’s management and relied
`upon by the Board in recommending that the shareholders vote in favor of the Proposed
`Transaction. These financial forecasts were also relied upon by the Company’s financial advisors,
`Qatalyst and Goldman Sachs, in rendering their fairness opinions.
`25. With respect to Slack’s Initial Three-Year Plan, the Registration Statement fails to
`disclose: (i) the value of certain line items used to calculate (a) Non-GAAP Gross Profit, and (b)
`Non-GAAP Operating Income (Loss); and (ii) a reconciliation to its most comparable GAAP
`measures, in direct violation of Regulation G and, consequently, Section 14(a).
`26. With respect to Slack’s Updated Three-Year Plan and Related Extrapolations, the
`Registration Statement fails to disclose: (i) the value of certain line items used to calculate (a)
`
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`
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`- 7 -
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`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 9 of 18
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`Non-GAAP Gross Profit, (b) Non-GAAP Operating Income (Loss), (c) Unlevered Free Cash
`Flow, and (d) Unlevered Free Cash Flow Less Stock-Based Compensation; (ii) a reconciliation to
`its most comparable GAAP measures, in direct violation of Regulation G and, consequently,
`Section 14(a); and (iii) stock-based compensation.
`27.
`The SEC has indicated that if the most directly comparable GAAP measure is not
`accessible on a forward-looking basis, the company must disclose that fact, provide any
`reconciling information that is available without unreasonable effort, identify any unavailable
`information and disclose the probable significance of that information. A company is permitted to
`provide the projected non-GAAP measure, omit the quantitative reconciliation and qualitatively
`explain the types of gains, losses, revenues or expenses that would need to be added to or
`subtracted from the non-GAAP measure to arrive at the most directly comparable GAAP
`measure, without attempting to quantify all those items.
`28. When a company discloses non-GAAP financial measures in a registration
`statement that were relied on by a board of directors to recommend that shareholders exercise
`their corporate suffrage rights in a particular manner, the company must, pursuant to SEC
`regulatory mandates, also disclose all forecasts and information necessary to make the non-GAAP
`measures not misleading, and must provide a reconciliation (by schedule or other clearly
`understandable method) of the differences between the non-GAAP financial measure disclosed or
`released with the most comparable financial measure or measures calculated and presented in
`accordance with GAAP. 17 C.F.R. § 244.100.
`29.
`Indeed, the SEC has increased its scrutiny of the use of non-GAAP financial
`measures in communications with shareholders. Former SEC Chairwoman Mary Jo White has
`stated that the frequent use by publicly traded companies of unique company-specific, non-GAAP
`financial measures (as Slack included in the Registration Statement here), implicates the
`centerpiece of the SEC’s disclosures regime:
`
`
`In too many cases, the non-GAAP information, which is meant to supplement the
`GAAP information, has become the key message to investors, crowding out and
`effectively supplanting the GAAP presentation. Jim Schnurr, our Chief
`Accountant, Mark Kronforst, our Chief Accountant in the Division of Corporation
`
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`
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`- 8 -
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`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 10 of 18
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`Finance and I, along with other members of the staff, have spoken out frequently
`about our concerns to raise the awareness of boards, management and investors.
`And last month, the staff issued guidance addressing a number of troublesome
`practices which can make non-GAAP disclosures misleading: the lack of equal or
`greater prominence for GAAP measures; exclusion of normal, recurring cash
`operating expenses;
`individually
`tailored non-GAAP
`revenues;
`lack of
`consistency; cherry-picking; and the use of cash per share data. I strongly urge
`companies to carefully consider this guidance and revisit their approach to non-
`GAAP disclosures. I also urge again, as I did last December, that appropriate
`controls be considered and that audit committees carefully oversee their
`company’s use of non-GAAP measures and disclosures.1
`30.
`The SEC has repeatedly emphasized that disclosure of non-GAAP forecasts can
`be inherently misleading and has therefore heightened its scrutiny of the use of such forecasts.2
`Indeed, the SEC’s Division of Corporation Finance released a new and updated Compliance and
`Disclosure Interpretation (“C&DI”) on the use of non-GAAP financial measures to clarify the
`extremely narrow and limited circumstances, known as the business combination exemption,
`where Regulation G would not apply.3
`31.
`More importantly, the C&DI clarifies when the business combination exemption
`does not apply:
`
`
`There is an exemption from Regulation G and Item 10(e) of Regulation S-K for
`non-GAAP financial measures disclosed in communications subject to Securities
`Act Rule 425 and Exchange Act Rules 14a-12 and 14d-2(b)(2); it is also intended
`to apply to communications subject to Exchange Act Rule 14d-9(a)(2). This
`exemption does not extend beyond such communications. Consequently, if the
`                                                       
`1
`Mary Jo White, Keynote Address, International Corporate Governance Network Annual
`Conference: Focusing the Lens of Disclosure to Set the Path Forward on Board Diversity, Non-
`GAAP, and Sustainability (June 27, 2016), https://www.sec.gov/news/speech/chair-white-icgn-
`speech.html (last visited Aug. 18, 2020) (emphasis added).
`2
`See, e.g., Nicolas Grabar and Sandra Flow, Non-GAAP Financial Measures: The SEC’s
`Evolving Views, HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE (June 24, 2016),
`https://corpgov.law.harvard.edu/2016/06/24/non-gaap-financial-measures-the-secs-evolving-
`views/ (last visited Mar. 7, 2019); Gretchen Morgenson, Fantasy Math Is Helping Companies
`TIMES,
`Apr.
`22,
`2016,
`Profits,
`N.Y.
`Spin
`Losses
`Into
`http://www.nytimes.com/2016/04/24/business/fantasy-math-is-helping-companies-spin-losses-
`into-profits.html?_r=0 (last visited Aug. 18, 2020).
`3
`Non-GAAP Financial Measures, U.S. SECURITIES AND EXCHANGE COMMISSION (Apr. 4,
`2018), https://www.sec.gov/divisions/corpfin/guidance/nongaapinterp.htm#101 (last visited Aug.
`18, 2020). To be sure, there are other situations where Regulation G would not apply but are not
`applicable here.
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`
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`- 9 -
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`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 11 of 18
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`same non-GAAP financial measure that was included in a communication filed
`under one of those rules is also disclosed in a Securities Act registration
`statement, proxy statement, or tender offer statement, this exemption from
`Regulation G and Item 10(e) of Regulation S-K would not be available for that
`non-GAAP financial measure.
`
`Id.
`
`32.
`Thus, the C&DI makes clear that the so-called “business combination” exemption
`from the Regulation G non-GAAP to GAAP reconciliation requirement applies solely to the
`extent that a third-party, such as a financial advisor, has utilized projected non-GAAP financial
`measures to render a report or opinion to the Board. To the extent the Board also examined and
`relied on internal financial forecasts to recommend a transaction, Regulation G applies.
`33. Thus, to bring the Registration Statement into compliance with Regulation G as
`well as cure the materially misleading nature of the forecasts under SEC Rule 14a-9 as a result of
`the omitted information, Defendants must provide a reconciliation table of the non-GAAP
`measures to the most comparable GAAP measures.
`34.
`In addition, the Registration Statement completely fails to disclose prospective
`financial information for Salesforce. This information is material since Slack’s shareholders will
`own a part of the post-transaction entity.
`Financial Analyses
`35. With respect to Qatalyst’s Illustrative Discounted Cash Flow Analysis, the
`Registration Statement fails to disclose: (i) all line items used to calculate unlevered free cash
`flows; (ii) the underlying inputs used to derive the discount rate of 8.25% to 9.75%; (iii) the
`terminal values for Slack; (iv) the basis for applying a range of fully diluted enterprise value to
`next-12-month’s estimated UFCF multiples 30.0x to 45.0x; (v) the cash and cash equivalents of
`Slack as of October 31, 2020; (vi) the number of fully diluted outstanding shares of Slack
`common stock; (vii) the face value of Slack’s outstanding convertible debt as of October 31,
`2020; and (viii) the value of Slack’s non-controlling interest as of October 31, 2020.
`36. With respect to Goldman Sachs’ Implied Premia and Multiples Analysis, the
`Registration Statement fails to disclose: (i) the total number of fully diluted shares of Slack
`common stock outstanding; and (ii) Slack’s net debt.
`
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`- 10 -
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`

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`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 12 of 18
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`37. With respect to Goldman Sachs’ Illustrative Discounted Cash Flow Analysis, the
`Registration Statement fails to disclose: (i) all line items used to calculate unlevered free cash
`flow less stock-based compensation; (ii) the underlying inputs used to derive the discount rate of
`6.5% to 9.5%; (iii) the terminal values for Slack; (iv) the basis for applying an illustrative range of
`terminal year multiples of 25.0x to 35.0x to an assumed terminal year NTM unlevered free cash
`flow and the basis for applying perpetuity growth rates ranging from 2.3% to 6.3% (v) the number
`of fully diluted outstanding shares of Slack common stock; (vi) the net debt of Slack; and (vii) the
`net present value of the net operating losses and the basis for using an illustrative discount rate of
`8.0%.
`
`38. With respect to Goldman Sachs’ Illustrative Present Value of Future Share Price
`Analysis, the Registration Statement fails to disclose: (i) Goldman’s basis for applying enterprise
`value to NTM revenue multiples of 16.0x to 20.0x to NTM revenue estimates for Slack for each
`of the fiscal years 2022 to 2024; and (ii) the inputs underlying the discount rate of 8.0%.
`39. With respect to Goldman Sachs’ Premia Analysis, the Registration Statement fails
`to disclose the premia and transactions observed by Goldman Sachs in the analysis.
`40. With respect to Goldman Sachs’ Selected Companies Analysis, the Registration
`Statement fails to disclose the individual multiples and metrics for the companies observed by
`Goldman Sachs in the analysis.
`41.
`In sum, the Registration Statement independently violates both: (i) Regulation G,
`which requires a presentation and reconciliation of any non-GAAP financial measure to their
`most directly comparable GAAP equivalent; and (ii) Rule 14a-9, since the material omitted
`information renders certain statements, discussed above, materially incomplete and misleading.
`As the Registration Statement independently contravenes the SEC rules and regulations,
`Defendants violated Section 14(a) and Section 20(a) of the Exchange Act by filing the
`Registration Statement to garner votes in support of the Proposed Transaction from Slack
`shareholders.
`42. Absent disclosure of the foregoing material information prior to the special
`shareholder meeting to vote on the Proposed Transaction, Plaintiff will not be able to make a fully
`
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`
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`COMPLAINT FOR VIOLATIONS OF SECTIONS 14(a)
`AND 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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`- 11 -
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`

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`Case 3:20-cv-09369-JCS Document 1 Filed 12/28/20 Page 13 of 18
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`informed decision regarding whether to vote in favor of the Proposed Transaction, and she is thus
`threatened with irreparable harm, warranting the injunctive relief sought herein.
`
`FIRST CAUSE OF ACTION
`(Against All Defendants for Violations of Section 14(a) of the Exchange Act
`and 17 C.F.R. § 244.100 Promulgated Thereunder)
`43. Plaintiff repeats and re-alleges each allegation set forth above as if fully set forth
`
`herein.
`
`44. Section 14(a)(1) of the Exchange Act makes it “unlawful for any person, by the
`use of the mails or by any means or instrumentality of interstate commerce or of any facility of a
`national securities exchange or otherwise, in contravention of such rules and regulations as the
`Commission may prescribe as necessary or appropriate in the public interest or for the protection
`of investors, to solicit or to permit the use of his name to solicit any proxy statement or consent or
`authorization in respect of any security (other than an exempted security) registered pursuant to
`section 78l of this title.” 15 U.S.C. § 78n(a)(1).
`45. As set forth above, the Registration Statement