Phunware Inc. (NASDAQ:PHUN), an Austin-based company specializing in computer processing and data preparation services, has reached a settlement agreement in a lawsuit filed by a group of its early investors. The lawsuit, which was initiated on February 18, 2022, involved claims from the investors that they were unfairly subjected to a 180-day lock-up period following Phunware's transition to a public company.
On October 24, 2024, the parties involved, including the plaintiffs and individual director and officer defendants, entered into a Confidential Settlement Agreement. A subsequent Settlement Agreement and Mutual Release was signed on October 28, 2024, involving Phunware, the plaintiffs, the individual defendants, and Phunware's insurers.
Under the terms of the Settlement Agreements, the plaintiffs' claims against the individual director and officer defendants will be settled and released. The agreements also include provisions for the plaintiffs to stay collection of any judgment against Phunware pending the outcome of the company's arbitration with its legal proceedings against Wilson Sonsini Goodrich and Rosati, PC (WSGR).
Financially, the settlement will result in Phunware’s insurance carriers paying $2.8 million to the plaintiffs and $0.2 million to Phunware itself. Additionally, the insurance carriers will relinquish their subrogation claims against any recoveries Phunware may obtain from WSGR or its insurers.
Despite the settlement, the claims against Phunware in the Wild Basin Litigation will persist, with a bench trial scheduled for March 2025. Phunware has stated its intention to vigorously defend against the remaining claims and has not recorded a liability related to this lawsuit, as potential losses are not currently deemed probable or estimable.
InvestingPro Insights
Phunware's recent legal settlement comes amid a period of significant financial volatility for the company. According to InvestingPro data, Phunware has experienced a strong return over the last month and three months, with price total returns of 97.43% and 94.1% respectively. However, this positive short-term performance is juxtaposed against a 20.39% decline in the past week, highlighting the stock's high volatility—an attribute confirmed by InvestingPro Tips.
Despite the recent legal challenges, Phunware maintains a solid liquidity position. InvestingPro Tips indicate that the company holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations. This financial cushion could prove crucial as Phunware navigates ongoing legal proceedings and focuses on growth.
It's worth noting that while Phunware's revenue growth stands at an impressive 232.95% over the last twelve months, the company is not currently profitable. This aligns with the InvestingPro Tip suggesting that analysts do not anticipate profitability this year. Investors considering Phunware should be aware that there are 8 additional InvestingPro Tips available, offering further insights into the company's financial health and market position.
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