Venture Capitalist Bails Out OnLive

[Jeremy Wilkinson]

Venture Capitalist Bails Out OnLive

Business as usual for OnLive's customers, though over half of its former staff remain "non-hired".

Following last week's string of rumors [http://www.escapistmagazine.com/news/view/119144-Update-OnLive-Transitions-Into-New-Company] over the future of games streaming service OnLive, its new holding company has clarified some details in an official statement.

On August 17, technological investors Lauder Partners bought out all of OnLive's assets and transferred them to a company intending to trade under the same name. The assets include all of the service's intellectual property and technology, but not stocks and shares. The company expects users to remain unaffected by the changes, stating that all of OnLive's game rights will remain with the new company, and there should be no interruption to the service. It also hopes that the growth its userbase has seen in recent months will continue despite the company's downsizing, in which over 50% of its workforce has been laid off.

Unlike OnLive's assets, its shares were not transferred, so all former shareholders in the company have lost their stock without any payout. They have also not been offered shares in the new OnLive. This includes OnLive founder Steve Perlman, who is receiving "no compensation whatsoever", and the majority of executives will be receiving "reduced compensation". The statement said that this move was mainly in the hope that the company could hire as many new employees as possible with the budget it has available.

The shift affected those involved in OnLive somewhat more strongly. "Almost half of OnLive's staff were given employment offers by the new company at their current salaries immediately upon the transfer." This left more than half of the former company as "non-hired staff". The move hasn't left dropped employees completely out in the cold, though, as previous staff members will be offered consultancy work in exchange for options in the new OnLive. Additionally, once the company secures further funding, it plans to expand its staff by hiring new employees and former OnLive employees alike.

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[Vie]

Somebody break it to the Venture capitalist that he's come in a bit early - OnLive doesn't have much in the way of assets to strip yet.

[Capcha: words of wisdom... ..not sure if I just got sassed by a bot?]

 

[fix-the-spade]

HTC had more than $40million invested in Onlive, all gone, yet Onlive remains.

I predict a litigation shitstorm within the next six months. That may be a clever dodge to avoid paying debts, taxes and severance pay, but there were some mighty big fish with money in Onlive, I can't see them just rolling over.

 

[drkchmst]

Am i reading this correctly? The new company bought the guts of onlive but left the public company alone (now just essentially an empty shell) to officially start a new onlive company doing the same thing with half the guts from the old company...im officially confused and if i was a stockholder i might be pissed if i could begin to understand what just happened.

 

[Schadrach]

Am i reading this correctly? The new company bought the guts of onlive but left the public company alone (now just essentially an empty shell) to officially start a new onlive company doing the same thing with half the guts from the old company...im officially confused and if i was a stockholder i might be pissed if i could begin to understand what just happened.

I think you're not far off -- it sounds like a VC firm started a company, bought all assets from OnLive and plan to continue trading on the name OnLive without buying OnLive itself, and only hanging on to some of the employees.

I suspect like was mentioned above that there are going to be a lot of angry stockholders and a lot of litigation very shortly, since there is absolutely no way that that could have been in line with the corporate charter. On the other hand, doesn't this free "new OnLive" from OnLives liabilities, while screwing OnLive's creditors as well (when they immediately drop bankrupt, they have no assets to sell, so current liquid assets are all that can really be tapped?)?

 

[rcs619]

Ahh, the "job creators" of the United States at work. Well... creators of jobs once they kick out the old employees to make room first.

I don't think the idea of cloud gaming is going to go away any time soon, so here's hoping a lot of the OnLive guys that got screwed by these corporate shenanigans will be hired on at whatever companies rise up to try and compete with OnLive. Their experience setting up and working with a cloud gaming service should be pretty useful, I'd imagine.

 

[Pilkingtube]

Am i reading this correctly? The new company bought the guts of onlive but left the public company alone (now just essentially an empty shell) to officially start a new onlive company doing the same thing with half the guts from the old company...im officially confused and if i was a stockholder i might be pissed if i could begin to understand what just happened.

I think you're not far off -- it sounds like a VC firm started a company, bought all assets from OnLive and plan to continue trading on the name OnLive without buying OnLive itself, and only hanging on to some of the employees.

I suspect like was mentioned above that there are going to be a lot of angry stockholders and a lot of litigation very shortly, since there is absolutely no way that that could have been in line with the corporate charter. On the other hand, doesn't this free "new OnLive" from OnLives liabilities, while screwing OnLive's creditors as well (when they immediately drop bankrupt, they have no assets to sell, so current liquid assets are all that can really be tapped?)?

I too am incredibly confused. How can this work? Surely every shareholder in every company ever would always be terrified that the company can basically molt its skin at some point and they lose everything. I don't understand how a company can basically shrug its shoulders, screw over half of their employees and all of their creditors, then keep going trading under the same name, as they are technically a new company (even though it's pretty much exactly the same company but with less staff to pay).

Also, even if this weird shit they pulled is somehow legal, how do they think anybody would ever trust them enough to lend them money again?

 

[weirdee]

wow, i

i didn't even know you could destroy somebody's holdings rights like that

kind of undermines the purpose of the system

who would even accept stock options from somebody who just screwed over all of the previous shareholders

 

[fix-the-spade]

Also, even if this weird shit they pulled is somehow legal, how do they think anybody would ever trust them enough to lend them money again?

That's why it doesn't happen all the time. Even after the big switch, you'll still need investors, suppliers and customers, after stunts like this all three can be hard to find.

There is also the minor point that the old investors and creditors (and staff) can still sue the new Onlive (or even it's 'new' owners) if they want. All they have to do is make the case that Onlive have made this swerve with the specific purpose of reneging on previous liabilities (and avoiding employment laws), or that they gained said liabilities with the intent of doing this at a later date.

Both of those constitute fraud and while what they've done is legal in the strictest criminal sense I doubt they'd walk away from civil action intact. Especially given how sudden and apparently well hidden this has been.

 

[CardinalPiggles]

Sounds like quite a few people just got fucked over really badly.

How long before the servers shut down and people can't play for what they paid for I wonder.

 

[robert01]

Smells like litigation. Feel bad for all the 'little' people that get effected by this though.

 

[Whateveralot]

We are never going to see OnLive, unless someone pumps more money in this thing. A shame that everyone willing to do so up till now is cheated on massively by this act.

The idea was great, but right now, it's an empty shell that everyone will leave laying on the street, broken and ugly as it is now.

 

[SpAc3man]

I can't see anyone investing in them after this.

 

[SL33TBL1ND]

This really did just come out of nowhere, didn't it?