Following yesterday’s disclosure of board resignations and allegations against management, video aggregator Roo says it is appointing Kaleil Isaza Tuzman, currently President and COO of JumpTV, as its new CEO, replacing Robert Petty. JumpTV (TSE: JTV) had announced in October that Tuzman would be leaving in January to pursue other interests. Petty will retain the office of Vice-Chairman of the Board of Directors and Founder. It also said that as part of a “strategic realignment” it will lay off 21 percent of its workforce. KIT Capital, an entity controlled by Tuzman, has been given the option to acquire up to 51 percent of the preferred class of shares at $.38 per share, and the right to invest $5 million in common stock at $.16 per share. Tuzman will also name new independent board members to replace the four that have resigned. A call is being held to discuss the moves. Shares of Roo, which plummeted yesterday, are up 29 percent to $.18 today. Release | Webcast (10:00 AM ET).
Conference Call: The conference call introducing the new CEO echoed the tone of the release, that these moves represent the beginning of an exciting chapter for Roo. But before it can realize its opportunities, it has to raise cash and slash costs, hence the layoffs and the investment from Tuzman. The 21 percent staff reduction, approximately 40 or so employees (this number took some coaxing before being provided), is supposedly just the beginning of the cost cutting measures. More layoffs sound likely in the near term. A few times, management noted that the development work on Roo’s core product is complete, so now it can let go of developers.
– On the board resignations, outgoing CEO Robert Petty stuck to the script that there is no disagreement, and that they just wanted to “focus on other things”. But Tuzman interjected, saying the departures were a natural move, given that his investment in the company allows him to appoint his own directors.
– Tuzman also explained his reasons for the move and the investment saying his interest lies in the B2B side of things, rather than JumpTV’s consumer-oriented product. Top priorities: “Getting our house in order with respect to burn rate… profitability.” He also suggested that one of Roo’s weaknesses is its lack of premium content, an issue he hopes to address. Tuzman’s investment, which has not happened yet, will create approximately 30 million new common shares in the company, bringing its common share count to around 70 million. The purchase of preferred shares will not be dilutive.
– The call leaves plenty of questions unanswered: There was little talk about why the company has encountered such problems this year, nor was there any mention of certain legal issues alluded to in yesterday’s filing. Also, there was no discussion of where News Corp. (NYSE: NWS) stands with its investment announced earlier this year.