Potential Fly in the Ointment for CoStar's Matterport Deal as Former CEO Entitled to $79M Payout

A potential stick may have been thrown in the spokes of CoStar's deal for Matterport as a Delaware judge ruled this week that former Matterport CEO Bill Brown is entitled to recoup $79 million from the company.

Vice Chancellor Lori W. Will had already determined in a previous ruling that Matterport improperly restricted Brown from selling his shares shortly after the company went public in 2021. In her latest edict, Will stated that Brown is entitled to compensation based on the company’s share price at the time of its IPO.

The ruling comes at an interesting juncture for Matterport, as it is in the process of being acquired by CoStar in a $1.6 billion deal. The merger is expected to take three to nine months to finalize, pending regulatory approval with some experts claiming that the Washington-based commercial real estate behemoth is overpaying for Matterport.

Brown had initially sought $141 million in damages, arguing that he should be compensated based on Matterport’s peak share price. However, Judge Will rejected this claim, deciding that $79 million was an appropriate amount that reflects the period when Brown would likely have sold his shares post-IPO in 2021.

The case ultimately stemmed from company by-laws that Matterport introduced before going public that restricted shareholders from selling stock as the company stabilized.

Brown challenged these bylaws in a 2022 lawsuit, arguing that his shares were excluded from the lockup period and was right to do so in the opinion of the Judge.

Brown ultimately sold all of his shares for $80.4 million. Including the damages from his lawsuit and has earned a total of$159.5 million from Matterport’s IPO, plus interest.

Neither CoStar nor Matterport responded immediately to requests for comment on whether the ruling would affect the takeover deal. Matterport indicated in a filing with the U.S. Securities and Exchange Commission that it plans to appeal the ruling.