More Woes for Matterport as Fired Exec Claims Company Cooked Its Books in Lawsuit

August 9, 2024
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The California-based PropTech company Matterport is facing a lawsuit that has the potential to scupper its $1.6 billion takeover by U.S. real estate data and portal giant CoStar.

In a lawsuit filed in a Santa Clara court on the 2nd of August, former Matterport Sales Executive Vinatha Kutagula claims that the digital real estate scanning company was engaged in "illegal and unethical practices".

Kutagula was hired in 2021 as Vice President of Customer operations. In 2022 her brief was expanded to include sales and she was promoted to the company's executive leadership team. She was fired from the company in March this year and alleges that her termination was because she raised concerns.

Her lawsuit claims that “She was pushed out of the company because she raised concerns about illegal and unethical practices, business integrity, material risks to financial data, discriminatory behaviors by HR and sales leaders, and an overall toxic workplace”.

In a statement to given to U.S. realtor-facing publication Inman.com, Matterport called the allegations "baseless" and said that it was "proud of its commitment to operating in an ethical, legal and inclusive manner".

Kutagula claims that she was personally targetted by VP of Sales, Rob Hines and Chief Revenue Officer, Jay Remley for raising her concerns to them and to Matterport's CEO RJ Pittman.

In one instance that allegedly occurred in the third quarter of 2023, the suit says that Kutagula told upper management about certain Matterport sales which were closed at a negative margin and which, she said, represented a financial and legal risk to the company.

The suit claims that sales staff "rolled out their own referral incentives for the largest deal for their personal gain" and "manipulated another large, deeply discounted renewal contract". Kutagula claims she periodically worked with Matterport's legal and finance teams to rectify these issues but to no avail.

Perhaps the most serious of the allegations relates to the period in March 2024 when CoStar was in the final stages of setting up a deal to acquire Matterport. According to the suit, as Matterport executives were receiving additional stock and incentives Kutagula "flagged material financial risks" to the CEO. Those risks in question would have seen "a drastic dip in NDR for the second half of 2024", ie the period after the merger deal would have been signed.

The suit claims that Kutagula’s employment was terminated at Matterport within an hour of sharing these concerns with Pittman.

In its second-quarter filings released to the market this week, Matterport reported a revenue increase of 6.7% year-on-year along with a spectacular tripling of net losses which totalled $144 million for the three-month period.

The allegations come at a particularly sensitive time for Matterport. The company is already facing the prospect of having to pay its former CEO, Bill Brown $79 million in a dispute over a share lockup period.

Matterport's shareholders recently voted to accept CoStar's proposed $1.6 billion takeover deal. Although CoStar group has not commented on either lawsuit, it may well be digging deeper.

August 9, 2024
Since March 2020 Edmund's job has been to read about, write about, collect data on, analyse and generally know about real estate marketplaces and the companies that run them. Before that he worked at the aggregator Mitula Group (which became Lifull Connect) for five years.

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