By Cara Waters
Atlassian billionaire Mike-Cannon Brookes is embroiled in legal proceedings brought by disgruntled shareholders in the United States against self-driving car startup Zoox over its $US1.3 billion ($1.8 billion) sale to Amazon.
The Zoox shareholders claim the proceeds of the sale were "dwarfed" by transaction and other bonuses paid to Zoox executives, and a majority of the Zoox board including Mr Cannon-Brookes had been conflicted in their roles in the sale process.
Mr Cannon-Brookes is not named as a defendant and was not one of the executives who was paid a bonus.
Zoox was co-founded by Jesse Levinson (left) and Melbourne designer Tim Kentley-Klay (right).Credit: Shaughn and John
The self-driving car startup was co-founded by Melbourne entrepreneur Tim Kentley-Klay in 2014 and backed by heavyweight Australian investors including Mr Cannon-Brookes, who invested $100 million in the company, venture capital fund Blackbird Ventures and superannuation fund Hostplus.
Mr Cannon-Brookes described Zoox as "the most ambitious company I have ever been associated with" and the startup was hyped as the 'robo-taxi' future of autonomous driving with a valuation that reached as high as $US3.2 billion.
However Zoox struggled after Mr Kentley-Klay was ousted from his role as chief executive in 2018 and the startup was forced to raise a $US200 million convertible note in October last year to extend its runway before it laid off around 10 per cent of its 1000 employees in April.
Zoox's sale to Amazon in June at almost a third of its previous valuation is being litigated by shareholders James Wei and Yanxin Zhang, who filed a verified complaint to compel inspection of Zoox's books and records in Delaware's Chancery Court this week.
Atlassian co-founder Mike Cannon-Brookes was one of Zoox's earliest backers.Credit: Janie Barrett
The shareholders claim Zoox used the financial crisis caused by COVID-19 to justify an underpriced sale in exchange for personal benefits despite starting the sale process "long before the pandemic".
"The merger agreement was approved by written consent from conflicted insiders, without need for any approval by unconflicted outside common stockholders," the complaint states.
It claims the circumstances surrounding the term sheet and exclusivity agreement with Amazon were "concerning" with Zoox agreeing to a "fully-baked" term sheet with Amazon about a day after receiving an indication of interest from the e-commerce giant and failing to engage its legal counsel until two days before the term sheet was signed.
The shareholders claim Zoox’s status as a private company meant they received "very little information on key issues" and inspection was needed to ascertain the value of their shares and to investigate events leading up to the sale "in order to determine whether it is appropriate to pursue litigation against all or some members of the board and/or company management".
The shareholders also want to investigate any apparent wrongdoing in connection with the sale, determine how Zoox's directors and senior officers were compensated, whether they were beneficiaries of any related-party transactions, and to investigate the independence and disinterestedness of the directors generally.
The complaint claims a majority of the Zoox board was conflicted and highlights the role of Mr Cannon-Brookes who "has been involved with Zoox since its earliest days".
Mr Cannon-Brookes first invested in Zoox through Blackbird and joined the Zoox board after leading Zoox's series B investment with a personal investment of $100 million.
The complaint states Mr Cannon-Brookes reportedly negotiated a ratchet provision that guaranteed he would recoup his investment in the event Zoox sold for a lower price, and a further investment by the Atlassian co-founder was protected via a convertible note.
"The information statement does not disclose whether Cannon-Brookes retains any interest in Zoox via Blackbird Ventures, or the size and nature of Blackbird’s current stake in Zoox," the complaint states. "Despite these conflicts, the information statement contains no indication that Cannon-Brookes was walled off from substantive negotiations or deliberations regarding the acquisition."
Mr Cannon-Brookes and Blackbird declined to comment on the case, but a spokesperson for Blackbird said he wanted to clarify Mr Cannon-Brookes' role at the venture capital firm.
"He is an investor in all our funds and on the board of our management company, but he is not involved in the operational day-to-day decision making of the firm," the spokesperson said.
Zoox and Amazon did not respond to a request for comment prior to publication.