IBM's $6.4 Billion Acquisition of HashiCorp Faces Legal Challenge from Shareholder


Staff member
May 18, 2022

**IBM's $6.4 Billion Acquisition of HashiCorp Faces Legal Challenge from Shareholder**​

IBM's $6.4 billion plan to acquire HashiCorp is facing a legal challenge. A shareholder has filed a lawsuit against HashiCorp and its executives, alleging that the deal disproportionately benefits corporate leaders over shareholders. This lawsuit, filed in a US federal court in Oakland, California, claims the agreement breaches US law.

**Key Allegations in the Lawsuit**

The lawsuit highlights that HashiCorp's board, including CEO Dave McJannet and CTO Armon Dadgar, stand to gain significantly from the acquisition. McJannet holds $270 million in common stock and options, while Dadgar holds $646 million. The complaint alleges that portions of these assets will be exchanged in ways not available to public stockholders. Furthermore, it claims executives have been promised substantial "golden parachutes."

The complaint also argues that proxy statements filed with the SEC lack essential financial disclosures needed to properly value the acquisition. This omission, according to the lawsuit, violates US securities laws and seeks to prevent the deal from being finalized.​

**Background of the Acquisition**

IBM and HashiCorp announced the acquisition on April 24, with IBM offering $35 per share in cash. IBM aims to leverage HashiCorp's Terraform software to enhance its enterprise client services. Despite the announcement, IBM's shares have dropped from around $184 to approximately $168.

**Licensing Controversy and Stock Performance**

The deal has kept HashiCorp's stock around the proposed sale price, reversing a decline in late 2023. The decline followed HashiCorp's decision to shift Terraform from the Mozilla Public License (MPL) to the Business Source License (BSL) 1.1. This shift prompted developers to create an open-source fork called OpenTofu. On April 3, HashiCorp sent a cease-and-desist letter to OpenTofu maintainers, alleging misuse of BSL code—a charge they dispute.

**Unexpected Turn in Legal Proceedings**

In a surprising development, the law firm representing the plaintiff has filed to dismiss the claims, and a HashiCorp shareholder named in the lawsuit denies involvement. This twist raises questions about the lawsuit's legitimacy. HashiCorp has yet to comment on the matter.