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A Court in the US state of Delaware has ordered former Mindbody Chief Executive Rick Stollmeyer and Vista Capital to pay approximately US$48 million because of Stollmeyer’s breach of his fiduciary duties to Mindbody shareholders during the sale of the then-publicly owned company in 2018.

According to a 120-page Court decision following an eight-day trial in 2022, while looking to sell the company to Vista, the company that bought and now runs Mindbody, Stollmeyer drove down share prices and shared inside information with Vista. The Court found that Stollmeyer (pictured) breached his duties to shareholders when he “greased the wheels” for Vista.

Chancellor Kathaleen St. Jude McCormick of Delaware Chancery Court ruled in favour of former Mindbody shareholders on 15th March, awarding damages of US$1 per share, plus interest, or about US$48 million. The judgement was based on evidence of what Vista would have paid without Stollmeyer’s interference.

According to McCormick’s opinion, in 2018, Stollmeyer “had grown frustrated with his inability to monetize his holdings of Mindbody stock, fearful of the volatility and fickleness of the public markets, and uncertain about his ability to lead Mindbody through its next stage of its growth."

In order to solve his problems, Stollmeyer decided it was time to sell.

Before Mindbody’s board began to search for a merger partner, Stollmeyer had already selected Vista, though he did not tell the board. Stollmeyer also failed to inform the board that he had attended a summit where he learned of the great wealth Vista delivered to former chief executives of companies they obtained.

McCormick’s opinion also advised that Vista aided and abetted Stollmeyer’s breach of fiduciary duties when they signed off on his inadequate disclosures.

Her opinion went on to state “Stollmeyer suffered a disabling conflict because he had an interest in near-term liquidity, a desire to sell fast, and an expectation that he would receive post-merger employment accompanied by significant equity-based incentives as a Vista CXO.

“Stollmeyer tilted the sale process by strategically driving down Mindbody’s stock price and providing Vista with informational and timing advantages during the due-diligence and go-shop periods.”

According to Reuters, any recovery from Stollmeyer and Vista will be on top of a US$27 million settlement that shareholder counsel from Bernstein Litowitz and Friedlander & Gorris reached in June 2022 with Institutional Venture Partners, a private equity fund that held a big stake in Mindbody before the Vista takeover. 

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