Judge Dismisses MySpace Buyout Lawsuit
- by Wendy Davis @wendyndavis, October 10, 2006
"Apparently the shareholders decided that an acquisition price of $580 million for Intermix's equity stock was a fair price for a 'dot com' company with quarterly earnings of $1.2 million, even if net income was growing exponentially," wrote Judge Carolyn B. Kuhl in a ruling issued Friday.
The lawsuit, spearheaded by former Intermix CEO Brad Greenspan, alleged that shareholders didn't realize the full extent of MySpace's potential value when they approved the takeover. Specifically, the lawsuit charged that company executives didn't reveal that MySpace was outperforming other Intermix assets, or that its earnings had allegedly grown 900 percent year-over-year.
But the court found that the shareholders knew enough to legitimately approve the deal. "A company is not required to disclose all financial data needed to make an independent determination of value; instead 'basic financial data,' consisting of the company's audited financial statements, is sufficient," wrote Kuhl.
Greenspan Monday said in a statement that he planned to appeal the decision.
Last week, shortly before this opinion came down, Greenspan publicly sought a federal probe of News Corp.'s acquisition of MySpace. He posted a report on the site FreeMySpace.com claiming that MySpace is worth around $20 billion--or around 35 times what News Corp. paid for the company. That report also referenced a separate shareholder suit filed in August in federal court.
Last September, Greenspan unsuccessfully tried to derail the deal by offering shareholders $13.50 a share for Intermix--$1.50 per share more than News Corp.
Before the News Corp. deal, Greenspan and Intermix also came under attack for distributing adware without giving users adequate notice. Greenspan ultimately agreed to pay $750,000 to settle charges brought by New York State Attorney General Eliot Spitzer.
