On August 16, 2024, Wolf Popper LLP and co-counsel filed a class action for breach of fiduciary duty in the Court of Chancery of the State of Delaware on behalf of the former public stockholders of Eargo, Inc., a medical device company specializing in the research, development, and strategic marketing of hearing aids. The class action is brought on behalf of former Eargo stockholders whose shares were extinguished as part of the February 2024 buyout of Eargo’s minority stockholders by Patient Square Capital, L.P. (“Patient Square”), Eargo’s controlling stockholder that owned approximately 76.2% of Eargo’s outstanding common shares at the time. Under the terms of the buyout, Eargo’s minority stockholders received $2.55 per share in cash for each share of Eargo common stock they held. The buyout closed on February 16, 2024, without a vote by Eargo’s minority stockholders. The Complaint asserts claims against Patient Square and Justin Sabet-Payment, who was a director of Eargo and a partner at Patient Square.
The Complaint in the class action alleges, among other things, that the buyout was unfair to Eargo’s minority stockholders as to process and price. The Complaint alleges that the process was fundamentally flawed due to the absence of a “go-shop” provision, which would have allowed Eargo to seek alternative bids potentially offering better terms for minority shareholders, and because the buyout did not include a “majority-of-the-minority” provision, which would have required approval from a majority of unaffiliated minority shareholders. The Complaint further asserts that the $2.55 per share buyout price was unfair to Eargo’s minority shareholders.
The Complaint also claims that the process was compromised by the involvement of Sabet-Peyman, who held dual fiduciary roles as both a director of Eargo and a representative of Patient Square. It is alleged that Sabet-Peyman prioritized Patient Square’s interests over those of the minority shareholders, failing to ensure a fair negotiation or to secure a higher price for their shares.
The case is Nau et al. v. Patient Square Capital, L.P., et al., C.A. No. 2024-0860-JTL (Del. Ch.), pending before Vice Chancellor J. Travis Laster.