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Redfin’s shareholder vote on the merger with Rocket Companies will go ahead as planned on Wednesday, despite the efforts of company stockholder Jason Morano.
Morano filed a motion for preliminary injunction in mid-May in which he asked a court to enjoin the shareholder vote on the merger of Redfin and Rocket. On Tuesday, Judge John H. Chun of the U.S. District Court in Seattle denied Morano’s motion and cleared the path for Wednesday’s vote.
Chun’s ruling comes after Redfin filed supplemental disclosures with the Securities and Exchange Commission (SEC) late last week due to the objections made by Morano in his motion for a preliminary injunction.
“The supplemental disclosures provide the NOL (net operating loss) Projections used in preparing the Fairness Opinion, and moot Plaintiff’s disclosure claim about the NOL Projections,” Chun wrote in his ruling. “They also inform shareholders that the fees Rocket paid to Goldman Sachs under the 2024 Revolver were ‘substantially less than Goldman Sachs’ compensation in connection with the Merger.’”
In a filing, Morano said he was satisfied with the disclosures made by Redfin. But he still maintained that the proxy statement was misleading as it “fails to inform Redfin stockholders about the size of Goldman’s present and anticipated lending commitment to Rocket.”
“According to Plaintiff, this is a material omission because shareholders need this information ‘to evaluate the magnitude of Goldman Sachs’ potential conflict, and weigh for themselves the credibility of Goldman Sachs’ fairness opinion in light of that conflict,’” the ruling states.
“The Court cannot agree that the size of Goldman Sachs’s present and anticipated lending commitment to Rocket is a material omission based on the ‘total mix’ of information that is already available to investors.”
The judge noted that Rocket’s 10-K for fiscal year 2024 is publicly available through the SEC and includes information on the revolver between Rocket and Goldman Sachs, as well as other arrangements with other lenders.
“In addition, the supplemental disclosures to the proxy statement alert shareholders to this litigation,” the filing states. “The docket and all current filings in this case are available to the public. So the declaration of Pete Mareskas in Support of Rocket Companies Inc.’s Opposition, much like Rocket’s filings with the SEC, is readily available and within the public domain; it was also filed on the docket before the supplemental disclosures were issued.”
While Goldman Sachs’ exact commitments under the 2024 and 2025 revolvers were redacted in the SEC filings, Mareskas’s declaration notes that the lender’s commitments to the 2024 revolver was “less than 15% of the total aggregate commitment.”
“All in all, the ‘total mix’ of information available to investors explains that Rocket and Goldman Sachs were involved in a revolving credit facility with a total commitment of $1.15 billion dollars when Goldman Sachs prepared the Fairness Opinion,” the filing states.
“Redfin shareholders can use this information to evaluate the magnitude of any potential conflict between Goldman Sachs and Redfin, and Redfin shareholders can decide for themselves whether this potential conflict influenced the credibility of the Fairness Opinion.”
Due to this, Chun chose to deny the preliminary injunction request, allowing the shareholder vote to proceed as scheduled. But Morano is not the only one to take issue with the proposed merger.
On Wednesday, a group of U.S. lawmakers including Elizabeth Warren (Mass.) and Cory Booker (N.J.) — the top Democrats on the Senate banking and antitrust committees — as well as Bernie Sanders (I-Vt.), Mazie Hirono (D-Hawaii) and Tina Smith (D-Minn.), sent a letter to the Department of Justice (DOJ) and the Federal Trade Commission (FTC).
The senators asked why the agencies had not challenged the merger after its announcement in early March. The letter was first reported by Reuters.
The senators also highlighted Rocket’s planned acquisition of Mr. Cooper, as they feel it raises more concerns about the level of consolidation currently taking place in the housing industry.
“These deals would combine the second-largest mortgage originator, the largest mortgage servicer, and the third-most-visited real estate brokerage website in the United States, into a massive, vertically integrated conglomerate that may reduce choice and raise prices for American families in the housing market,” the lawmakers wrote.
They went on to argue that the acquisition of Redfin could allow Rocket to steer homebuyers searching on the Redfin platform to the combined firm’s real estate agents or mortgage lending services.
Additionally, the senators argue that the data the firm collects about user behavior could be leveraged to raise mortgage rates.
Rocket and Redfin did not return HousingWire‘s requests for comment.
