FNZ faces US$4.6 bill claim from employee shareholders

The claim has been filed by Kiwi CayLP, which is a trustee entity representing a significant proportion of employee equity. The plaintiffs claim they have been prejudiced through the dilution of their shareholding from the issuance of preference shares and warrants in FNZ on non-commercial terms during 2024 and 2025.

Prior to these raises, FNZ’s last publicly available valuation was approximately US$20 billion, and therefore the estimated value of the shares held by Class B Shareholders, who represented 23% of the total equity, was approximately US$4.6 billion.

The claim alleges the combined impact of these transactions enabled a select group of institutional and private equity investors to obtain a three-times multiple of their new capital in preference to employees. These shareholders in addition received substantial new equity through warrants, which were issued for negligible consideration.

It is alleged that these transactions had the effect of immediately transferring over US$1.5 billion in value from employees to the institutional and private equity investors involved, over and above any capital raised. Furthermore, the transactions will have the effect that on exit, employee shareholders’ equity would be diluted to zero if FNZ was to be valued in a sale or IPO at less than US$8.3 billion.

The claim alleges these transactions were approved by FNZ directors who carried significant conflicts of interest by also being employees and directors of the institutional and private equity investors who stood to benefit from these non-commercial transactions at the expense of FNZ employee shareholders.

The FNZ board includes representatives of major international financial institutions Caisse de dépôt et placement du Québec, Temasek and the Canada Pension Plan Investment Board, as well as private equity firms Generation Investment Management and Motive Partners.

FNZ says in a statement: “FNZ notes the claim filed in New Zealand and considers it to be entirely without merit. We are confident that our directors have at all times acted in the best interests of the company, its clients, employees and all stakeholders. The investments by FNZ’s institutional shareholders reflect a strong commitment to the company’s long-term growth and success, an outcome that can only be in the best interests of all its stakeholders.”

The claim alleges that FNZ Group Limited, which is domiciled in New Zealand, and its directors have breached the New Zealand Companies Act 1993, outlining 16 causes of action:

A)    Four claims under s 174 of the Act that the affairs of a company have been conducted in a manner that is oppressive, unfairly discriminatory, or unfairly prejudicial to the plaintiffs with regard to each of the Fiat Transactions (respectively and, in the alternative, together);
B)    Four claims under s 131 of the Act that the Directors have failed to act in good faith and in the best interests of the company with regard to each of the transactions;
C)    Four claims under s 133 of the Act that the Directors have failed to exercise their powers for a proper purpose with regard to each of the transactions and;
D)    Four claims under s 137 of the Act that the Directors have failed to exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances with regard to each of the transactions.