For the last few months, the legal team at JPMorgan has been doing its utmost to shoo away Good Technology, a onetime software unicorn and investment banking client that ended up selling itself to BlackBerry in an acquisition so fantastically good for the latter – “an absolutely fire sale fantastic deal,” one venture capital backer said – that Good investors began to grow a bit suspicious. Their fear, according to a suit filed last year, was that JPMorgan pawned off Good on the cheap in order to deepen its relationship with BlackBerry.
Why anyone would want a deeper relationship with BlackBerry is beside the point. What mattered was Good investors' contention – backed up by some candid snippets of banker-talk – that JPMorgan could earn more money in M&A fees and future services to BlackBerry than it could simply taking Good through an IPO. As Good's investors alleged, the difference in fees between an IPO and a merger was some $2 million.
Now the whole ordeal is going to cost JPMorgan far more than a scant two mil. On Thursday, just hours after a Delaware judge ordered the case to trial, JPMorgan cracked open its wallet and dished out $35 million for the aggrieved investors, the FT reports. Evidently the House of Dimon didn't feel so hot about going through the whole court rigmarole.
Of course, it would be irresponsible to call this a vindication of the investors arguments. As a Dealbreaker commenter who self-identified as an investment banker noted the last time we wrote about the case:
...it's extremely easy for a bank to argue consolidation is better than being a stand-alone business (cost/revenue synergies, EPS accretion models). I don't buy the fraudulent claims here.
Highly doubt much will come from this.
Then again, it's clear why JPMorgan would feel queasy about going to trial when there's stuff like this floating around in subpoenaed documents and depositions:
Cristina Morgan, a vice-chair in the technology banking group at JPMorgan and the relationship manager for the Good account, wrote in an early 2015 internal email, recently disclosed in a court filing: “The important assignment here [at Good] is the M&A engagement so whatever we have to get that matters.”
Ms Morgan, in a recent deposition, was asked by the suing shareholders if IPOs were a loss leader for JPMorgan. She responded that “IPOs are a loss leader for all banks”.
Again, this is more suggestive than it is dispositive. But no one wants their I-banking dirty laundry hung out for all to see.