Abramowski v. Nuvei Corp - Court rejects tendered shares

U.S. C OURT OF A PPEALS FOR THE T HIRD C IRCUIT No. 24- 3156 P AWNEET A BRAMOWSKI, et al. Appellants v. N UVEI C ORP., et al. _____________ _______________ _ On Appeal from the U.S. District Cou rt, D. Del. Judge Gregory B. Williams, No. 1:23 - cv - 00965 Before: P ORTER, F REEMAN, and C HUNG, Circuit Judges Argued Oct. 22, 2025; Decided Feb. 3, 2026 ____________ _ ___ _____________ O PINION OF THE C OUR T P OR TER, Cir cuit Judge. Appellants were shareholders in Paya Holdings, In c. (“Paya”) who, in response to a tender offer from Defendant - Appellee Nuvei Corporation (“Nuvei”), tendered their shares for payme nt. Nuvei rejected Appellants’ shares as invalidly tendered under the parties’ private agreements. App ellants sued, claiming, among other things, that the Secu rit ies and Exchange Commission’s (“SEC”) Best Price Rule required Nuvei to purchase their tend ered shares. The District Court dis - missed the suit. Because the Best Price Rule is silent as to

2 whether tender offerors may en force restrictions on the transfer of tendered shares, we will affirm. I A Appellants were the “Spon sors” of a special purpose acquisition vehicle (“SPAC”) 1 named Fintech Acq uisition Corp. III. J oint Appendix (“J.A.”) at 62 – 63. I n August 202 0, Fintech merge d with Paya, thereby taking Paya public. On the same day, Appellants entered into a Sponsor Support Agreement (“SSA”) with Paya whereby the ir Fintech “pro - mote” shares were converted into “Earnout Shares” in Pay a. J.A. at 187. To a lign the Appellants’ long - term interests with Paya’s other shareholders, the Earnout Shares were nontrans - ferable, with limited exceptions not relevant here, until Octo - ber 16, 2025 — the end of the “Earnout Period.” J.A. at 189. The SSA provided that the Earnout Shares would become transfer - able upon “the first Ch ange in Control to occur during the Earnout Period” if the price per share paid was abov e $15.00. J.A. at 187 – 88. B ut if the price per share was below that amount, “n one of the Earnout Sh ares subject to transfer restrictions shall become free of t ransfer restrictions . . . and all of the Earnout Shares shall be auto matically forfeited immedi - 1 A SPAC is a publicly traded company whose sole mis - sion is to merge with a private company in a “de - SPAC” transaction, akin to an IPO, cau sing that company to become public with an infusion of the SPAC’s capital. S ee generally Julie Young, Special Pur pose Acquis ition C ompany (S PAC) Explaine d: Example s and Ris ks, Investopedia (updated Feb. 6, 2025), https://perma.cc/833W - LK2M.

3 ately prior to the consummation of such Change of Control. ” J.A. at 188. B On Januar y 8, 202 3, Paya ente red into a Two - Step Merger Agreement with Nuvei under Delaware Code Tit le 8, section 251 (h). Pursuant to the Merger Agreement, Nuvei would “ purchase all the shares of [Paya] Compa ny Comm on Stock” for $9.75 per share by “means of an offer to purchase.” J.A. at 353, 37 5. In the Offer to Purchase, Nuvei covenanted to “irrevocably accept for paymen t all Shares validly tendered,” which require d, inter alia, that the shareholder submit “a properly completed and duly executed Letter of Transmittal in accordance with the instructions of the Letter of T ransmittal.” J.A. at 226, 229. The Letter of Transmittal, in turn, state d that the shares are validly tend ered only if the shareholder “has full power and authority to tender, sell, assign and transfer any and all of the Shares tendered h ereby.” J.A. at 445. Nuvei’s offer was to be consummated at midnight on Februa ry 22, 202 3, on the condition that the number of shares “validly tendered ” totaled one share greater than 50% of the outstanding sh ares as of the consummation time. J.A. at 212. C Appellants tendered their Earnout Shares in response to Nuvei’s tender offer, but Nuvei did not purchase the m because under the SSA they “were not tend ered free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. ” J.A. a t 292. Appellants sued, claiming Nuvei violated the SEC’s Best Price Rule, 17 C.F.R. § 240.14d - 10(a)(2) — which requires the offeror to pay th e same

4 consideration for all securities tendered — by paying the Appellants $0 per share while other common stockholders received $9.75 per share. T h e District Court granted Nuvei’s motion to dismiss for failure to state a claim, rejecting Appellants’ Best Price Rule theo ry because no consideration was “ actually ” paid so the Rule was never triggered. J.A. at 14. Appellants appeal only that holding. II 2 T he Best Price Rule and the related All Holders Ru le were “promulgated pursuant to section s 14(d) and 14(e) of the Williams Act,” which itself was “enacted for th e purpose of protecting target company shareholders” in tender offers. Polaroi d Corp. v. D isney, 86 2 F.2d 987, 996 (3d Ci r. 1988). The All Holders Rule requires that a tender o ffer be “open to all security holders of the class o f securities subject to the ten - der offer.” 17 C.F.R. § 240.14d - 10(a)(1). The Best Price Rule, in turn, requires the offeror to pay “to any security holder for securities tendered in the tender offer [ ] the highest consider - ation paid to any other security holder for securities tendered in the tender offer.” Id. § 240.14d - 10(a)(2). 2 The District Court had jurisdiction und er 18 U.S.C. § 1331. We have appellate jurisdiction under 28 U.S.C. § 1291. We review the district court’s grant o f a motion to dismiss for failure to state a claim de novo. See Vallies v. Sky Bank, 43 2 F.3d 493, 4 94 (3d Ci r. 2006). To survi ve a motio n to dismiss, a “complaint must contain sufficient factual m at - ter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (20 09) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 5 70 (2007)).

5 We have addressed each rule just once. First, in Polaroi d Corp., we held that the All Holders Rule is validly within the SEC’s rulemaking autho rity under the Williams Act and that Section 14(d) of the Act creates an implied priv ate right of action to enforce the provision. 862 F.2d at 994 – 97. Because the plaintiff lacked stand ing, we did not reach the question — similar to the one p resented here — whether a tender offeror may reject certain share s based on its own determination that those shares are inv alid under the terms of the tender offer. Id. at 992. Second, in In re Digital Island Securities Litigation, we held that Ru le 9(b)’s heightened pleading standard for allegations of frau d applies to Best Price Rule claims and that payments mad e before the commence - ment of a tender offer are generally excluded f rom the reach of the Best Price Rule. 357 F.3d 322, 334 – 37 (3d C ir. 2004). This appeal presents a novel question of law: Whether the Best Price Rule requires the acquiring company in a tender offer to pur - chase any tendered shares, even those that are subject to self - imposed transfer restrictions. We hold that it d oes not. When interpreting a fed eral regulation, “ we look to well - established principles of statutory interpretation.” Bonkowski v. Oberg Ind us., 787 F.3d 190, 199 (3d Cir. 2015). Our analysis of the Best Price Rule “begins a nd ends with t he ordinary meaning of” its plain text. United States v. Johnson, 114 F.4th 14 8, 154 (3d Ci r. 2024). Appellants argue that, because they are “security holders of the class of securities subject to the tender” whose “securities [were] tendered in the tender offer,” 17 C.F.R. § 240.1 4d - 10(a)(1) – (2), they are enti - tled to the $9.75 share price other shareho lders received. T hat reading goes too far. It is true that th e Appellants were common stockhol ders at the time the tender offer was

6 initiated 3 and that they tendered their shares in respon se to the offer. But it would contort the Best Price Rule beyond recog - nition to suggest that the Rule requires offerors to purchase every tendered share, even tho se restricted by the parties’ prior agreement s. A gain, the Rule requires that the con sideration paid to one tend ering shareholder must be the same as the highest consideration paid to any other tendering shareholder. By its plain terms, the Rule relates to the co nsideration that must be paid to tendering shareholders at the completion of a proposed tender offer. But it is silent as to when, if ever, an offeror must purchase tendered shares or wh ether that offeror may include in the tender offer terms and conditions of acceptance, such as Nuvei’s requirement that the tend ered shares be freely transferable or outstanding at the consumma - tion of the change of co ntrol. We are un able to rewrite th e Best P rice Rule to say somet hing that it does not; that is a job for Congress and the SEC. See Rotkiske v. Klemm, 589 U.S. 8, 14 (2019) (“It is a fund amental principle of statutory interpreta - tion that ‘absent provision [s] cannot be supplied by the courts.’ ”) (quoting Antonin Scalia & Bryan Garner, Read ing Law: The Interpretation of Legal Texts 94 (2012)). 3 T he All Holders Rule requires an offer to b e “open to all security holders” of the same class of secu rities. 17 C.F.R. § 240.14d - 10(a)(1). The Merger A greement describes Appellants’ Earnout Shares as common sto ck. J.A. at 387 (noting there were “132,238,723 shares of Comp any Common Stock . . . issued or outstanding, of which 5,6 81,812 are subject to earnout and forfeiture in accord ance with the Support Agreemen t.”) (emphasis added). It is undisputed that Nuvei ’s tender offer was open to Appellants and thus com - plied with the All Holders Rule.

7 Appellants’ reading of the Best Price Rule also runs counter to a relevant provision of the Williams Act. S ee 15 U.S.C. § 78n(d)(7); cf. Sch reiber v. Burlington N., Inc., 472 U.S. 1, 9 n.9 (1985) (“ Section 14(d) [ ] imposes specific sub - stantive requirements on those making a tender o ffer. T hese requirements include. . . the payment of the same price to all those whose shares are purchased, 15 U. S. C. § 78n(d)(7). ”); Polaroi d Corp., 862 F. 2d at 994 – 95. Section 78n(d)(7) requires equal payment, but only to those security hold ers “whose securities are taken up and paid for pursuant to the ten - der offer.” 15 U.S.C. § 78n(d)(7). In other words, the statute presupposes that a tendered share might not be taken up and paid for, leaving room for terms and conditions suc h as those in Nuvei’s offer. Appellants point to broad pronouncements in th e Rule ’ s legislative and regulatory history to support their strained read - ing. But “[w ] here the statutory language is unambiguous, the court should not consider statutory purpose or legislative his - tory.” In re Phila. N ewspapers, LLC, 599 F.3d 298, 30 4 (3d Cir. 201 0); see also N ew Jersey v. New York, 523 U.S. 767, 813 (1998) (Breyer, J., concurring) (“[S]ilence is not ambigu - ity[.]”). In any event, our reading comports with the SEC’s guidance, common sense, and longstanding indus try pra ctice. See, e.g., In re WH X, Exchange Act Release No. 47, 980, 80 S.E.C. Docket 1153 (June 4, 2003) (noting that it is common for an offer to be “op en to all shareholders, but an action taken independently by an individual shareholder encumbers the shares and limits the shareholder’s ability to p articipate in the offer”), overruled o n other gro unds by WHX Corp. v. SEC, 362 F.3d 854 (D.C. Cir. 2004).

8 Because federal law is silent on the issue presented, it is governed by the parties’ private agreements formed under state law. Appellants did not appeal, and we do no t reach, the District Court’s holding that Nuvei did not breach the Merger Agreement by refusing to purchase the Earnout Shares because, pursuant to the SSA, th o se shares were forfeited prior to the consummation of the change of control. * * * F or the se reasons, w e will affirm the District Co urt’s order dismissing Appellants’ Best Price Rule claim. Counsel for Appellants Javier Bleichmar Derrick Farrell [ARGUED ] B LEICHMAR F ONTI & A ULD Counsel for Appellees Brian Burnovski [ARGUED ] Chui - Lai Cheung Matthew Cormack D A VIS P OLK & W ARDWELL Kev in M. Coen M ORRIS N ICHOLS A R SHT & T UNNELL