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`UNITED STATES DISTRICT COURT
`DISTRICT OF DELAWARE
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`JOHN THOMPSON, Individually and On
`Behalf of All Others Similarly Situated,
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`v.
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`FITBIT, INC., JAMES PARK, ERIC N.
`FRIEDMAN, LAURA ALBER, MATTHEW
`BROMBERG, GLENDA FLANAGAN,
`BRADLEY M. FLUEGEL, STEVEN
`MURRAY, and CHRISTOPHER PAISLEY,
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`Defendants.
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`Case No. ______________
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`JURY TRIAL DEMANDED
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`CLASS ACTION
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`Plaintiff,
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`COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934
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`Plaintiff, by his undersigned attorneys, for this complaint against defendants, alleges upon
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`personal knowledge with respect to himself, and upon information and belief based upon, inter
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`alia, the investigation of counsel as to all other allegations herein, as follows:
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`NATURE OF THE ACTION
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`1.
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`This action stems from a proposed transaction announced on November 1, 2019
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`(the “Proposed Transaction”), pursuant to which Fitbit, Inc. (“Fitbit” or the “Company”) will be
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`acquired by Google LLC (“Parent”) and Magnoliophyta Inc. (“Merger Sub,” and together with
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`Parent, “Google”).
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`2.
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`On November 1, 2019, Fitbit’s Board of Directors (the “Board” or “Individual
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`Defendants”) caused the Company to enter into an agreement and plan of merger (the “Merger
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`Agreement”) with Google. Pursuant to the terms of the Merger Agreement, Fitbit’s stockholders
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`will receive $7.35 in cash for each share of Fitbit common stock they own.
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`Case 1:19-cv-02236-UNA Document 1 Filed 12/06/19 Page 2 of 10 PageID #: 2
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`3.
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`On November 25, 2019, defendants filed a proxy statement (the “Proxy Statement”)
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`with the United States Securities and Exchange Commission (the “SEC”) in connection with the
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`Proposed Transaction.
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`4.
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`The Proxy Statement omits material information with respect to the Proposed
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`Transaction, which renders the Proxy Statement false and misleading. Accordingly, plaintiff
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`alleges herein that defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of
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`1934 (the “1934 Act”) in connection with the Proxy Statement.
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`JURISDICTION AND VENUE
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`5.
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`This Court has jurisdiction over the claims asserted herein pursuant to Section 27
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`of the 1934 Act because the claims asserted herein arise under Sections 14(a) and 20(a) of the 1934
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`Act and Rule 14a-9.
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`6.
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`This Court has jurisdiction over defendants because each defendant is either a
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`corporation that conducts business in and maintains operations within this District, or is an
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`individual with sufficient minimum contacts with this District so as to make the exercise of
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`jurisdiction by this Court permissible under traditional notions of fair play and substantial justice.
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`7.
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`Venue is proper under 28 U.S.C. § 1391(b) because a substantial portion of the
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`transactions and wrongs complained of herein occurred in this District.
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`PARTIES
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`8.
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`Plaintiff is, and has been continuously throughout all times relevant hereto, the
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`owner of Fitbit common stock.
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`9.
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`Defendant Fitbit is a Delaware corporation and maintains its principal executive
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`offices at 199 Fremont Street, 14th Floor, San Francisco, California 94105. Fitbit’s common stock
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`is traded on the New York Stock Exchange under the ticker symbol “FIT.”
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`2
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`Case 1:19-cv-02236-UNA Document 1 Filed 12/06/19 Page 3 of 10 PageID #: 3
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`10.
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`Defendant James Park is Chief Executive Officer and Chairman of the Board of the
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`Company.
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`11.
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`Defendant Eric N. Friedman is Chief Technology Officer, Executive Officer, and a
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`director of the Company.
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`12.
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`13.
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`14.
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`15.
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`16.
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`17.
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`18.
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`Defendant Laura Alber is a director of the Company.
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`Defendant Matthew Bromberg is a director of the Company.
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`Defendant Glenda Flanagan is a director of the Company.
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`Defendant Bradley M. Fleugel is a director of the Company.
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`Defendant Steven Murray is a director of the Company.
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`Defendant Christopher Paisley is a director of the Company.
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`The defendants identified in paragraphs 10 through 17 are collectively referred to
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`herein as the “Individual Defendants.”
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`CLASS ACTION ALLEGATIONS
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`19.
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`Plaintiff brings this action as a class action on behalf of himself and the other public
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`stockholders of Fitbit (the “Class”). Excluded from the Class are defendants herein and any
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`person, firm, trust, corporation, or other entity related to or affiliated with any defendant.
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`20.
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`21.
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`This action is properly maintainable as a class action.
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`The Class is so numerous that joinder of all members is impracticable. As of
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`October 28, 2019, there were approximately 228,873,413 shares of Fitbit common stock
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`outstanding, held by hundreds, if not thousands, of individuals and entities scattered throughout
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`the country.
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`22.
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`Questions of law and fact are common to the Class, including, among others,
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`whether defendants will irreparably harm plaintiff and the other members of the Class if
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`3
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`Case 1:19-cv-02236-UNA Document 1 Filed 12/06/19 Page 4 of 10 PageID #: 4
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`defendants’ conduct complained of herein continues.
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`23.
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`Plaintiff is committed to prosecuting this action and has retained competent counsel
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`experienced in litigation of this nature. Plaintiff’s claims are typical of the claims of the other
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`members of the Class and plaintiff has the same interests as the other members of the Class.
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`Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately
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`protect the interests of the Class.
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`24.
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`The prosecution of separate actions by individual members of the Class would
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`create the risk of inconsistent or varying adjudications that would establish incompatible standards
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`of conduct for defendants, or adjudications that would, as a practical matter, be dispositive of the
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`interests of individual members of the Class who are not parties to the adjudications or would
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`substantially impair or impede those non-party Class members’ ability to protect their interests.
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`25.
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`Defendants have acted, or refused to act, on grounds generally applicable to the
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`Class as a whole, and are causing injury to the entire Class. Therefore, final injunctive relief on
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`behalf of the Class is appropriate.
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`Background of the Company and the Proposed Transaction
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`SUBSTANTIVE ALLEGATIONS
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`26.
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`Fibit designs products and experiences that track and provide motivation for
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`everyday health and fitness.
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`27.
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`The Company’s line of products includes Fitbit Charge 3™, Fitbit Inspire HR™,
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`Fitbit Inspire™, and Fitbit Ace 2™ activity trackers, as well as the Fitbit Ionic™ and Fitbit
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`Versa™ family of smartwatches, Fitbit Flyer™ wireless headphones, and Fitbit Aria family of
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`smart scales.
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`Case 1:19-cv-02236-UNA Document 1 Filed 12/06/19 Page 5 of 10 PageID #: 5
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`28.
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`The Company’s products are carried in approximately 39,000 retail stores and in
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`over 100 countries around the world.
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`29.
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`On November 1, 2019, Fitbit’s Board caused the Company to enter into the Merger
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`Agreement with Google.
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`30.
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`Pursuant to the terms of the Merger Agreement, Fitbit’s stockholders will receive
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`$7.35 in cash for each share of Fitbit common stock they own.
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`31.
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`According to the press release announcing the Proposed Transaction:
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`Fitbit, Inc. (NYSE: FIT) today announced that it has entered into a definitive
`agreement to be acquired by Google LLC for $7.35 per share in cash, valuing the
`company at a fully diluted equity value of approximately $2.1 billion. . . .
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`The transaction is expected to close in 2020, subject to customary closing
`conditions, including approval by Fitbit’s stockholders and regulatory approvals.
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`Qatalyst Partners LLP acted as financial advisor to Fitbit, and Fenwick & West LLP
`acted as legal advisor.
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`The Proxy Statement Omits Material Information, Rendering It False and Misleading
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`32.
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`Defendants filed the Proxy Statement with the SEC in connection with the Proposed
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`Transaction.
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`33.
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`As set forth below, the Proxy Statement omits material information with respect to
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`the Proposed Transaction, which renders the Proxy Statement false and misleading.
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`34.
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`First, the Proxy Statement omits material information regarding the Company’s
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`financial projections.
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`35.
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`The Proxy Statement fails to disclose, for each set of projections: (i) all line items
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`used to calculate (a) Non-GAAP Cost of Revenue, (b) Non-GAAP Gross Profit, (c) Non-GAAP
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`Operating Expense, (d) Non-GAAP Operating Income (Loss), (e) NOPAT, (f) Adjusted EBITDA,
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`(g) Non-GAAP Net Income (Loss), and (h) Non-GAAP Earnings Per Share; and (ii) a
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`Case 1:19-cv-02236-UNA Document 1 Filed 12/06/19 Page 6 of 10 PageID #: 6
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`reconciliation of all non-GAAP to GAAP metrics.
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`36.
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`The disclosure of projected financial information is material because it provides
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`stockholders with a basis to project the future financial performance of a company, and allows
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`stockholders to better understand the financial analyses performed by the company’s financial
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`advisor in support of its fairness opinion.
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`37.
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`Second, the Proxy Statement omits material information regarding the analyses
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`performed by the Company’s financial advisor in connection with the Proposed Transaction,
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`Qatalyst Partners LLP (“Qatalyst”).
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`38. With respect to Qatalyst’s Illustrative Discounted Cash Flow Analysis, the Proxy
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`Statement fails to disclose: (i) the individual inputs and assumptions underlying the range of
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`discount rates of 12.5% to 16.5%; (ii) the terminal value of the Company; (iii) Qatalyst’s basis for
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`applying a range of multiples of enterprise value to next-twelve-months estimated revenue of 0.3x
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`to 0.8x; (iv) the Company’s forecasted tax attributes outstanding as used in the analysis; (v) the
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`Company’s cash; and (vi) the number of fully-diluted shares of Fitbit common stock.
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`39. When a banker’s endorsement of the fairness of a transaction is touted to
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`shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and
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`range of ultimate values generated by those analyses must also be fairly disclosed.
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`40.
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`The omission of the above-referenced material information renders the Proxy
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`Statement false and misleading, including, inter alia, the following sections of the Proxy
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`Statement: (i) Background of the Merger; (ii) Recommendation of our Board and Reasons for the
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`Merger; (iii) Opinion of Fitbit’s Financial Advisor; and (iv) Financial Projections.
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`41.
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`The above-referenced omitted information, if disclosed, would significantly alter
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`the total mix of information available to the Company’s stockholders.
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`Case 1:19-cv-02236-UNA Document 1 Filed 12/06/19 Page 7 of 10 PageID #: 7
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`COUNT I
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`Claim for Violation of Section 14(a) of the 1934 Act and Rule 14a-9 Promulgated
`Thereunder Against the Individual Defendants and Fitbit
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`42.
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`43.
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`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
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`The Individual Defendants disseminated the false and misleading Proxy Statement,
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`which contained statements that, in violation of Section 14(a) of the 1934 Act and Rule 14a-9, in
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`light of the circumstances under which they were made, omitted to state material facts necessary
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`to make the statements therein not materially false or misleading. Fitbit is liable as the issuer of
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`these statements.
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`44.
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`The Proxy Statement was prepared, reviewed, and/or disseminated by the
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`Individual Defendants. By virtue of their positions within the Company, the Individual Defendants
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`were aware of this information and their duty to disclose this information in the Proxy Statement.
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`45.
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`The Individual Defendants were at least negligent in filing the Proxy Statement
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`with these materially false and misleading statements.
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`46.
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`The omissions and false and misleading statements in the Proxy Statement are
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`material in that a reasonable stockholder will consider them important in deciding how to vote on
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`the Proposed Transaction. In addition, a reasonable investor will view a full and accurate
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`disclosure as significantly altering the total mix of information made available in the Proxy
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`Statement and in other information reasonably available to stockholders.
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`47.
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`The Proxy Statement is an essential link in causing plaintiff and the Company’s
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`stockholders to approve the Proposed Transaction.
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`48.
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`By reason of the foregoing, defendants violated Section 14(a) of the 1934 Act and
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`Rule 14a-9 promulgated thereunder.
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`7
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`Case 1:19-cv-02236-UNA Document 1 Filed 12/06/19 Page 8 of 10 PageID #: 8
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`49.
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`Because of the false and misleading statements in the Proxy Statement, plaintiff
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`and the Class are threatened with irreparable harm.
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`COUNT II
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`Claim for Violation of Section 20(a) of the 1934 Act
`Against the Individual Defendants
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`50.
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`51.
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`Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.
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`The Individual Defendants acted as controlling persons of Fitbit within the meaning
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`of Section 20(a) of the 1934 Act as alleged herein. By virtue of their positions as officers and/or
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`directors of Fitbit and participation in and/or awareness of the Company’s operations and/or
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`intimate knowledge of the false statements contained in the Proxy Statement, they had the power
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`to influence and control and did influence and control, directly or indirectly, the decision making
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`of the Company, including the content and dissemination of the various statements that plaintiff
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`contends are false and misleading.
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`52.
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`Each of the Individual Defendants was provided with or had unlimited access to
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`copies of the Proxy Statement alleged by plaintiff to be misleading prior to and/or shortly after
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`these statements were issued and had the ability to prevent the issuance of the statements or cause
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`them to be corrected.
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`53.
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`In particular, each of the Individual Defendants had direct and supervisory
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`involvement in the day-to-day operations of the Company, and, therefore, is presumed to have had
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`the power to control and influence the particular transactions giving rise to the violations as alleged
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`herein, and exercised the same. The Proxy Statement contains the unanimous recommendation of
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`the Individual Defendants to approve the Proposed Transaction. They were thus directly involved
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`in the making of the Proxy Statement.
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`Case 1:19-cv-02236-UNA Document 1 Filed 12/06/19 Page 9 of 10 PageID #: 9
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`54.
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`By virtue of the foregoing, the Individual Defendants violated Section 20(a) of the
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`1934 Act.
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`55.
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`As set forth above, the Individual Defendants had the ability to exercise control
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`over and did control a person or persons who have each violated Section 14(a) of the 1934 Act and
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`Rule 14a-9, by their acts and omissions as alleged herein. By virtue of their positions as controlling
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`persons, these defendants are liable pursuant to Section 20(a) of the 1934 Act. As a direct and
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`proximate result of defendants’ conduct, plaintiff and the Class are threatened with irreparable
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`harm.
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`PRAYER FOR RELIEF
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`WHEREFORE, plaintiff prays for judgment and relief as follows:
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`A.
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`Preliminarily and permanently enjoining defendants and all persons acting in
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`concert with them from proceeding with, consummating, or closing the Proposed Transaction;
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`B.
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`In the event defendants consummate the Proposed Transaction, rescinding it and
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`setting it aside or awarding rescissory damages;
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`C.
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`Directing the Individual Defendants to disseminate a Proxy Statement that does not
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`contain any untrue statements of material fact and that states all material facts required in it or
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`necessary to make the statements contained therein not misleading;
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`D.
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`Declaring that defendants violated Sections 14(a) and/or 20(a) of the 1934 Act, as
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`well as Rule 14a-9 promulgated thereunder;
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`E.
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`Awarding plaintiff the costs of this action, including reasonable allowance for
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`plaintiff’s attorneys’ and experts’ fees; and
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`F.
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`Granting such other and further relief as this Court may deem just and proper.
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`9
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`Case 1:19-cv-02236-UNA Document 1 Filed 12/06/19 Page 10 of 10 PageID #: 10
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`Plaintiff hereby requests a trial by jury on all issues so triable.
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`JURY DEMAND
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`Dated: December 6, 2019
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`OF COUNSEL:
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`RM LAW, P.C.
`Richard A. Maniskas
`1055 Westlakes Drive, Suite 300
`Berwyn, PA 19312
`Telephone: (484) 324-6800
`Facsimile: (484) 631-1305
`Email: rm@maniskas.com
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`By:
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`RIGRODSKY & LONG, P.A.
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`/s/ Gina M. Serra
`Seth D. Rigrodsky (#3147)
`Brian D. Long (#4347)
`Gina M. Serra (#5387)
`300 Delaware Avenue, Suite 1220
`Wilmington, DE 19801
`Telephone: (302) 295-5310
`Facsimile: (302) 654-7530
`Email: sdr@rl-legal.com
`Email: bdl@rl-legal.com
`Email: gms@rl-legal.com
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`Attorneys for Plaintiff
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`10
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