Dropsuite Limited (ASX: DSE), headquartered in Melbourne, Australia, specialises in backup, recovery, and protection software. Established in 2012, the company provides cloud-based data security solutions to businesses globally. Dropsuite’s stock is currently trading at $5.75 per share, reflecting investor anticipation surrounding the pending acquisition by NinjaOne.
The Takeover Deal and Topline’s Initial Support
On 28 January 2025, Dropsuite announced that it had entered into a Scheme Implementation Deed (SID) with NinjaOne, under which NinjaOne Australia Pty Ltd would acquire 100% of Dropsuite’s ordinary shares for $5.90 per share in cash. This all-cash transaction valued the company at approximately $420 million.
As part of the announcement, Dropsuite included a statement regarding its largest shareholder, Topline Capital Management, which held 31% of the company’s shares. Topline confirmed that it intended to vote in favour of the transaction, provided there was no superior proposal and the independent expert deemed the scheme in the best interest of shareholders.
Sudden Share Sell-Off Raises Questions
Shortly after the acquisition announcement, between 28 January 2025 and 6 February 2025, Topline began selling its shares in Dropsuite, significantly reducing its stake from 31% (21.6 million shares) to 19.7% (13.8 million shares) through on-market sales. By 18 March 2025, Dropsuite reported that Topline had further reduced its holding to 10.47%.
In its required Form 604 disclosure submitted on 18 February 2025, Topline stated that it continued to support the acquisition but cited an unforeseen need for liquidity and concerns over its exposure, as Dropsuite had become a disproportionately large portion of its portfolio. Despite the share reduction, Topline reaffirmed its intent to hold its remaining shares and vote in favour of the transaction.
However, these sell-offs triggered alarm among market participants, particularly Harvest Lane Asset Management, which engages in merger arbitrage—an investment strategy that profits from price discrepancies in announced takeover deals.
Harvest Lane’s Allegations and Takeovers Panel Application
Harvest Lane submitted a formal application to the Australian Takeovers Panel, claiming that Topline’s initial statement of intent may have been misleading, as it did not specify any plan to sell shares before the shareholder vote.
The firm argues that the Intention Statement did not indicate that Topline reserved the right to sell shares before voting. A reasonable investor would have assumed that Topline intended to maintain its full 31% stake before voting in favour of the scheme. The on-market sales suggest that the Intention Statement may have been knowingly misleading. Even if the sales were planned, Topline failed to disclose them within the legally required timeframe, creating a false market to its own benefit.
Harvest Lane has requested interim orders to prevent Topline from further selling shares and final orders that would require Topline to restore its stake to 31% and vote accordingly in the scheme meeting, in line with the Takeovers Panel Guidance Note 23.
Current Status and Market Response
As of now, the Takeovers Panel has not appointed a sitting panel, nor has it decided whether to conduct formal proceedings. The panel has made no comment on the merit of Harvest Lane’s application.
The market is closely monitoring developments, as the outcome could influence future takeover-related disclosures and shareholder responsibilities. Meanwhile, Dropsuite shares continue to trade near the offer price at $5.75, reflecting market confidence that the acquisition will proceed despite the controversy. Investors await further updates, particularly any ruling from the Takeovers Panel, which could set a precedent for how intention statements are interpreted in Australian corporate takeovers.