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Shareholders Sue To Stop Google's Purchase Of On2

Google (NSDQ: GOOG) is offering a 57 percent premium to purchase video firm On2 Technologies — but that’s not enough to satisfy a cadre of On2 shareholders, who are suing to block the deal. Investors say there’s “no evidence that On2’s directors shopped the company in order to obtain the best possible price,” according to a lawsuit, first reported by the NYPost. They allege that while Google is offering a substantial premium to On2’s closing price the day before the deal was announced, On2’s stock had traded at almost double that price at some points during the prior year. Google is not commenting, while On2 did not respond to queries from several news agencies.

The lawsuit was foreshadowed by a rowdy On2 earnings call last week, during which shareholders repeatedly chastised management for agreeing to sell the company. “We have the world class technology; we sold for just sixty cents,” said one investor. After executives said in response to several questions that they could not offer additional details on the deal, one unnamed caller said, “I hope that you can respond better to the questions when we take you to court.”

On2 executives did acknowledge, however, that they had considered factors beyond price. “Our shareholders will have the opportunity to become shareholders of Google, arguably one of the most innovative and exciting technology companies in the world today,” said interim CEO Matt Frost in his prepared remarks. “Obviously, in evaluating Google

5 Responses to “Shareholders Sue To Stop Google's Purchase Of On2”

  1. James E. Clark

    I as a on2 shareholder would like to vote no on the byout from google. I previsouly voted yes, but I clearly think this is a ripoff. James E. Clark 2000 shares of On2.

  2. It's pretty simple – On2 management themselves estimated the potential gross worldwide value of their video compression technology at $5 Billion per annum by 2012:

    http://www.on2.com/blog/2008/08/better-video-compression-is-key-to-stemming-the-exaflood/

    So why should the owners of the company (shareholders) be happy with $100M for the whole shooting match, especially after their best quarter ever (Q2'09), the news of which was released coicidentally the day after the Google offer?

  3. sammy braswell

    for the last two years on2 has been signing up on avg. 50 customers per quarter and of that 50 on avg 10 are major customers(13 in this last q) that pay inexcess of $50,000 up front fees with follow on royalties. so on2 has a huge pipeline of royalty paying customers. Google has a hugh need for on2 s compression tech. see this reporthttp://www.netcompetition.org/study_of_google_internet_usage_costs2.pdf

  4. Jeremy Bradburg

    Matt Frost and the On2 Board of Directors refused to explain to shareholders why they're selling the company for pennies. Despite this repeated questioning during the most recent On2 conference call, they also refused to tell how the takeover would benefit them individually.

    They have clearly expressed their lack of interest in working at On2 in the recent strange and outrageous conference call:

    Transcript:

    http://www.sec.gov/Archives/edgar/data/1045280/000118811209001771/ex99-1.htm

    Audio:
    http://www.investorcalendar.com/IC/CEPage.asp?ID=148129

    (alternative) Audio:
    http://www.on2.com/index.php?id=472&news_id=682

    Matt Frost, the acting CEO of On2 – in connection with Google – is attempting to commit the ultimate breach of fiduciary trust against company shareholders – selling the company out. On2 Board members are also complicit in this fraudulent action.

    Matt Frost did not arrange a public auction for competitive bidding. For 14 months (since summer of 2008), he lied to shareholders by stating that he was to be replaced by a permanent CEO. For 11 months he withheld the latest product (VP8) from customers which was officially launched in Sept. 2008. He lied repeatedly to shareholders in prior conference calls by outrightly stating he would not sell the company.
    He completely failed to disclose to shareholders his intentions of selling the company.

    Matt Frost intends to vanquish 17+ years of engineering work done by On2 engineers for his own personal profit.

    On2 has reached a new, matured phase of its technology development resulting in accelerated sales of licenses of its advanced codec. There are several dozen customers of On2 in the USA and worldwide including China, Korea and Taiwan. Many significant customers include:

    Customers/Licensees:
    —————————-

    Adobe (Flash 8 video)
    AOL
    Skype
    Nokia
    XM Satellite Radio
    Sony
    Yamaha
    Texas Instruments
    LSI Logic
    Analog Devices
    Infineon
    Sun Microsystems
    Archos
    MIPS Alliance Program
    Westec Interactive
    Freescale
    NXP
    C2 Microsystems
    Genesys Logic
    Atmel
    ARM
    VideoEgg
    Brightcove
    Cox
    Naver.com (Korea)
    Daum (Korea)
    Boo-Ree Multimedia (Korea)
    MediaTek (Taiwan)
    Infomax Co. Ltd. (Taiwan)
    Nanwang Multimedia (China)
    Shanghai Info TM (China)
    Spreadtrum (China)
    Tencent (China)
    21ViaNet (China)
    Tudou.com (China)
    CCTV.com (China)
    56.com (China)
    NetEase(China)
    Eurosport (Europe, Russia, China)
    Monsoon Multimedia (India, USA, Russia)
    Mobixell
    Move Networks
    Verismo Networks
    Hulu
    Facebook
    Vimeo
    Yahoo! Video
    Dailymotion
    VisualOn
    ASUS

    Major Technology Partners:
    —————————-
    Zencoder (On2 Flix Cloud)
    Amazon (EC2)
    Sun Microsystems (JavaFX)

    Yet, for over the last year, On2's stock price has suffered continuous, relentless naked short-selling…bringing its shares down to artificial lows.

    On2's latest VP8 is so advanced that Google has acted in secret with On2's acting-CEO, Matt Frost and the On2 Board of Directors to arrange and close this deal before On2 company shareholders can oppose the deal.

    Google recognizes the importance of On2's sophisticated, patented technology:

    http://investor.google.com/releases/20090805.html

    Yet, instead of licensing the product to Google, Matt Frost (On2 interim CEO) is trying to give away the whole company to them for some bizarre reason.

  5. This is an interesting snapshot into the google jedi mind trick when they acquire someone.

    "This is the stock price you were looking for"
    yes this is the stock price we were looking for

    "you can sell your awesome tech on the cheap"
    I want to sell my awesome tech on the cheap

    "Your company has been assimilated …. move along"
    I have been assimilated …. moving along.