Business Context and Reporting Period
Company: Snap Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: June 21, 2023
Subject: Settlement of class action lawsuit regarding a special dividend and employment agreements for co-founders.
Key Financial Metrics
This filing is a current report regarding legal proceedings and does not contain financial statements. Consequently, the filing text does not provide clear values for revenue, profit, cash flow, margins, debt, or liquidity.
Material Changes and Legal Developments
On June 21, 2023, the Court of Chancery of the State of Delaware entered a scheduling order concerning a Stipulation of Compromise and Settlement regarding the lawsuit City of Warwick v. Snap Inc. et al. (filed August 2, 2022). The lawsuit alleged that a transaction involving employment agreements for co-founders and a potential stock dividend was not advantageous to stockholders and breached fiduciary duties.
Modification of Special Dividend Conditions: As part of the settlement, the conditions for declaring a special dividend of one share of Class A common stock on each outstanding share were modified:
- Previous Condition: 65-Day Volume Weighted Average Price (VWAP) equals or exceeds $40 per share.
- New Condition: 90-Day VWAP equals or exceeds $40 per share AND the ratio of the 90-Day VWAP to $8.70 (closing price on May 10, 2023) equals or exceeds the ratio of the average closing price of the S&P 500 index for the same 90 trading days to 8,862.85 (S&P 500 Total Return index closing value on May 10, 2023).
The settlement remains subject to conditions including notice to stockholders and judicial approval. A settlement fairness hearing is scheduled for September 7, 2023.
Guidance, Outlook, and Risks
The filing contains standard forward-looking statements cautioning that future results may differ due to risks including financial performance, ability to attain profitability, cash flow generation, user and advertiser retention, competition, regulatory compliance, and macroeconomic conditions. The company explicitly states it undertakes no obligation to update forward-looking statements except as required by law.
Investor Verification Checklist
- Verify the final terms of the Stipulation of Settlement and the outcome of the fairness hearing scheduled for September 7, 2023.
- Monitor the 90-Day VWAP of Snap Class A common stock relative to the $40 threshold and the S&P 500 index ratio to determine if the special dividend will be triggered.
- Review the full text of the Stipulation of Settlement (Exhibit 99.1) for additional terms not summarized in this 8-K.
- Confirm whether the settlement dismissal is finalized with prejudice following judicial approval.