The $189 million judgement awarded by a jury in a lawsuit against Vivint Smart Home ( NYSE: VVNT ) could lead to revised terms in the the company's planned sale to NRG Energy ( NYSE: NRG ), according to a Bank of America analyst.
"We see the Vivint lawsuit (a $189mn decision against the smart-home platform) as key to watch, with potential for revised term," BofA analyst Julien Dumoulin-Smith, who has a neutral rating and raised his price target to $35 from $32, wrote in a note on Tuesday.
Vivint Smart ( VVNT ) shares dropped 5% after the company disclosed that after a North Carolina jury ruled the company must pay $190 million in damages over a lawsuit filed by CPI Security Systems in 2020 related to alleged historical practices by certain Vivint sales personnel.
The legal judgement against Vivint Smart ( VVNT ) comes after NRG Energy ( NRG ) agreed to acquire Vivint Smart or $12/share, or $5.2 billion in cash and debt, in December.
NRG Energy ( NRG ) said in a statement to Seeking Alpha that it's "evaluating the decision" and its options.
"We are aware of the jury’s decision in CPI Security’s lawsuit against Vivint Smart Home," a NRG spokesman said in an email. "We are continuing to evaluate the decision and our options. As we shared during our recent earnings announcement, NRG’s acquisition of Vivint is pending and has not yet closed."
Based on the negative stock reaction when the deal was announced in December, with NRG ( NRG ) shares plunging 15% on the transaction announcement, NRG investors would likely view failure to complete the Vivint ( VVNT ) deal as a positive, according to BofA's Dumoulin-Smith.
"Given the attention on the deal, we query whether the latest judgement could drive a revision of acquisition term," Dumoulin-Smith added. "Given the near term closing contemplated (seemingly previously implied by end of February) watch this carefully in the week ahead for any shifts."
Vivint Smart ( VVNT ) said it believes the verdict was not "legally or factually supported" and plans to file an appeal.
“We are extremely disappointed with the jury’s decision, which we believe is not legally or factually supporter," the company said in a statement emailed to Seeking Alpha. "Furthermore, the amount of damages awarded are egregious and completely disconnected from the total economic impact of any activity that CPI claims to have occurred with respect to this matter. We intend to file an appeal, pursue all legal options available to us and continue to defend ourselves vigorously."
Vivint Smart ( VVNT ) short interest is 15%.
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Vivint Smart Home lawsuit loss could result in revised terms for NRG deal - analyst