Idealab, Investors Still Sparring Over Buyback
Technology
by Christopher Keough
The board of embattled incubator Idealab Inc. has turned down an offer to settle a $1 billion lawsuit filed earlier this year by a group of investors.
Earlier this month, the investor group countered Idealab’s offer to buy back shares for 10 cents on the dollar with its own proposal that would have upped the price to 37 cents.
The proposal would give all Idealab shareholders the choice of liquidating or maintaining their investment and came from investors in the fourth round, which closed in early 2000. The plan also proposed that investors in the first three rounds receive 50 cents for each dollar invested.
Idealab said the company could not afford the proposed settlement. As of Jan. 31, the company said it had cash and marketable securities of $381 million and estimated private securities between $150 million and $300 million.
In a letter signed “The Idealab Board of Directors” and delivered through regular mail, the company said that the proposal would result in a “de facto liquidation” because it would leave Idealab with a negative cash balance of more than $7 million.
The investors claim that Idealab could spend up to $355 million to buy back all the shares, leaving $18 million in cash and its remaining investments in private companies.
The plaintiff’s lawyer, Louis Miller of Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, said Idealab’s reaction means the suit will move forward with discovery and depositions beginning this week.
“We’re obviously disappointed it was rejected out of hand, but not surprised,” Miller said. “It’s disappointing when there’s no independent person to review it, no analysis and no substantive response.”
Idealab spokeswoman Teresa Bridwell said Miller made the liquidation proposal knowing that the company changed its operating plan in March to reflect higher operating budgets.
Everybody’s In
Sabeus Photonics Inc. closed its third round of funding after exceeding its initial goal by $6 million.
The optical networking manufacturer raised $21 million in a third round that closed April 11. The new funding came from Lexington Ventures LLC of Beverly Hills. Lexington and Sabeus officials could not be reached for comment.
The Chatsworth-based company now has raised $26 million since its founding on seed money in 1998. A second round of $5 million came from Redpoint Ventures in 2000.
Sabeus spokeswoman Abigail Johnson said Chief Executive Andre de Fusco was out of the country, but she confirmed that the $21 million would be used to continue development of the company’s technology, as well as beef up sales and manufacturing of its telecom business.
Sabeus makes components used in for fiber-optic networking.
Vidius Goes Far East
Vidius Inc., which provides software and servers to protect information on corporate computer networks, has signed a licensing deal with a Japanese distributor to take the company’s product to Asia.
Terms of the one-year deal with Alvus Corp. of Tokyo are not public, but Vidius officials confirmed Alvus paid better than $1 million up front for the right to market the technology. Alvus becomes the first international distributor of Vidius software, but Chairman and Chief Executive Derek Broes said deals are in the works with Lebanese and Saudi Arabian distributors to disseminate the company’s products in the Middle East and there will be deals in the United Kingdom and Germany, as well.
“Our original revenue projections of $2.5 million for this year are very low,” Broes said. “We already exceeded our first quarter earnings and we have $1 million collected and committed.”
Alvus will be the exclusive master distributor of Vidius products in Japan, with nonexclusive distribution rights in China, South Korea, Singapore, and Taiwan.
Vidius, of North Hollywood, is a venture-backed operation with $6.5 million in investment from CAP Ventures Inc. of Israel, STI Ventures of the Netherlands and Lexington Ventures.
Staff reporter Christopher Keough can be reached at (323) 549-5225 ext. 235, or at
[email protected].
