Suit Proves Attractive to Idealab Investor
Technology
by Christopher Keough
Phil Gustlin figured he was getting all he could out of Idealab Inc. when he accepted the company’s offer of 10 cents for each dollar he invested in the Pasadena Internet incubator. Then his fellow investors showed him a potentially sweeter deal.
The 67-year-old Brentwood resident said last week he would mail back the check from Idealab and rescind his tender on an undisclosed number of shares. Instead, he’ll join a group of fellow investors suing Idealab for more than $1 billion.
Gustlin said he figures he can get back more of his investment if the suit is successful, but conceded to knowing only as much about it as he has read in local newspapers.
Idealab spokeswoman Teresa Bridwell said she was unaware of Gustlin’s decision and that Idealab had not heard from others who had tendered their shares and then decided to renege.
In addition to asking for the $1 billion, the suit calls for the liquidation of Idealab, removal of the company’s board and an inspection of the company’s books and records. The suit was filed by Century City law firm Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro LLP on behalf of a group of minority shareholders who participated in a fourth round of funding for the company that totaled $1 billion.
The list of plaintiffs includes West L.A. VC firm Kline Hawkes & Co., Moore Global Investments Ltd. of New York and Dell Ventures of Red Rock, Texas.
Idealab officials consider the suit sour grapes from investors who took a chance and lost. Skip Miller, who represents the plaintiffs in the suit that was filed Jan. 18, said that misses the point. The suit claims that Idealab has $500 million in cash and liquid securities, and Chief Executive Bill Gross gave himself, as well as his fianc & #233;e and company President Marcia Goldstein, 100 percent raises rather than repay investors.
“We’re not claiming we didn’t know what we were getting into,” Miller said. “This is about self-dealing and abuse of power.”
Miller said the plaintiffs would be happy to let Gross have a couple of million dollars to finish the companies he claims to be bringing along. The company should be liquidated when that’s through, though, and the rest of the money should be returned to investors.
Idealab’s Bridwell responded, “The important thing to remember is their claim for liquidation has no basis in fact or law.”
Creative Planet Still Chugging
A year after arriving in L.A. as chief financial officer at Creative Planet Inc., Kelyn Brannon-Ahn has taken over the top spot.
Brannon-Ahn, who has been president since last summer and was formerly an executive at Amazon.com Inc. and Sun Microsystems Inc., replaces founder and Chief Executive Allen DeBevoise, who will retain the title of chairman.
Since joining Creative Planet in January 2001, Brannon-Ahn has been working to downsize staff and office space by divesting non-core assets. The result, she said, is a plan to hit profitability by the end of the second quarter. Creative Planet reduced its office space from 90,000 square feet to 13,000 at the Wilshire Courtyard complex in the Miracle Mile district. Staff has been slashed from 350 to 65.
Creative Planet has raised $100 million from the likes of Rustic Canyon Ventures, Waterview Advisors and Chase Capital Partners. Brannon-Ahn said the company has sufficient funding to reach self-sufficiency.
Creative Planet supplies Hollywood film and television studios with software, hardware and services that help them manage productions. The company’s two main software products are Movie Magic and Studio System, both of which have been updated in recent months to make them more customer-friendly.
EUniverse Hits Mark
As promised late last year, eUniverse Inc. announced a third straight quarter of profitability and record revenues for the third quarter ended Dec. 31.
Net income was $2 million (9 cents per share), compared with a net loss of $3.1 million (17 cents) for the like period a year ago. Revenues were $10.1 million, up from $4.6 million.
The interactive online entertainment network continues to grow despite a flagging advertising market and continued insistence by many that the model cannot hold up.
The company recently acquired direct marketing company L90 Inc.
Staff reporter Christopher Keough can be reached at (323) 549-5225 ext. 235, or at
[email protected].
