Lawsuits: Complaint and coverage
Alphonso founders and shareholders have sued LG Electronics in two cases (that I have uncovered so far)
I have been heads down researching the law-suites. I will have my take on the issue soon, still busy collecting details and doing analysis.
In the mean while, below are the public links to the complains, I was able to find two so far, also I have list of all the articles I could find about the matter so far. Drop me a tip at raphael_r_gogogo@proton.me /@raphael_r_gogogo (Telegram) if I missed any coverage.
The complains are publicly available at:
- 2023–0382 — ASHISH CHORDIA, ET AL v EDWARD LEE, ET AL
- 2023–0487 — ASHOK MAYYA v ZENITH ELECTRONICS LLC, ET AL
I was able to find coverage in following publications:
- Bloomberg Law: “LG Unit Accused of Scheme to ‘Pillage’ Ad Tech Business Alphonso”
- Law360: LG Ad Co. Founders Sue In Del. Chancery Over Board Makeup
- AdExchanger: Alphonso’s Founders Are Suing LG Electronics For Board-Related Shenanigans
- Law360: TV Ad Tech Co. Founders Get August Trial In Fight With LG
Below is my re-cap from all the coverage so far:
Mike Leonard at Bloomberg Law’s Legal Intelligence desk has his take over here, titled: “LG Unit Accused of Scheme to ‘Pillage’ Ad Tech Business Alphonso” (this is behind the paywall and I have some interesting titbidts that I quote below).
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Mike writes:
After “trying to bully and intimidate Alphonso’s management into renegotiating,” the LG-linked board members ambushed and ousted them, citing “a host of meaningless platitudes and pretextual excuses,” according to the complaint. The moves appear to have been aimed at pressuring the minority investors into selling their stake for less than it’s worth, the suit says.
Furthermore, Mike sheds light on incentives for LGE executives and how that might have something to do in this case.
Although there’s “no conceivably legitimate reason” for Alphonso’s leaders to agree to pay more, LG’s board affiliates became fixated on grabbing a greater share of the company’s profits after it repeatedly exceeded forecasts, at least in part because their own bonuses were tied to the performance of the electronics giant, the suit says.
Interestingly, Mike notes that two of the ‘Keyholders’ are still in the positions they were before December 2022 board meeting.
The plan reflects “a brazen effort to trample over the rights of the company’s minority stockholders,” the suit says — but not an effective one, because two other key holders remain in their corporate posts. They’re not parties to the case.
Mike also quotes Vice President of Marketing at LG Electronics USA, John Taylor as:
John Taylor, a senior vice president at Zenith and LG Electronics USA Inc., said Wednesday that the allegations are “without merit.”
AdExchanger says:
LG’s slim majority share in Alphonso plays a central role in the lawsuit, a sealed version of which was filed in Delaware’s Chancery Court late last week. A public version was made available on Tuesday.
Further, Allison Schiff says:
According to the lawsuit, ousting those execs was precipitated by their unwillingness to renegotiate the contract that Alphonso had originally signed with LG stating that Alphonso would have the opportunity to take the company public within five years of the deal closing.
LG’s goal, according to the suit, is to absorb 100% of Alphonso’s equity into the parent company without having to pay Alphonso’s more than 300 minority shareholders the actual value of the shares.
And goes on to say:
Now, the court will end up deciding the fate of that 49.9% minority stake in Alphonso ads.
The source told AdExchanger that LGE did offer a buyout to some of Alphonso’s shareholders last year, but that shares were priced based on a $125 million valuation, which is what the company was valued at in 2021 at the time of the acquisition.
According to the source, Alphonso was talking to investors in mid-December 2022 who had valued the company at around $2 billion, which would have yielded a payout eight times higher.
LG Ads/Alphonso generated around $100 million in 2021, nearly $300 million last year and is aiming to bring in more than $500 million this year, according to a source close to the company.
And LG’s PR department as expected had following to say:
When reached for comment, LG said: “Based on the recommendations of legal counsel, we are not currently offering any commentary on this particular matter at this time.
Law360 had two different posts on the matter.
Leslie Papas of Law360, first reported the law-suite “LG Ad Co. Founders Sue In Del. Chancery Over Board Makeup” and later followed-up with news about case going to trial in August 2023, “TV Ad Tech Co. Founders Get August Trial In Fight With LG”
Leslie reports in more detail on who all are named in the suite and are the defendents:
Other defendants include Adam Sexton, who became acting CEO of Alphonso in December 2022 when Chordia stepped down; Alphonso board chairman Matthew Durgin, also referred to in company press releases as a senior director at LG USA; and Ronald Wasinger, vice president and general counsel at LG USA.
Leslie also reported that in a bench rulling, Vice Chancellor Nathan A. Cook said:
During the litigation, Zenith and Alphonso many not alter an inventory agreement with the company’s South Korea-based parent, LG Electronics Inc., and may not make changes to a stockholder agreement, according to a status quo order. Vice Chancellor Cook granted Friday.
As with all the other reporting, again all LGE has to say on the matter is that case is without merit.
John I. Taylor, a senior vice president at LG’s North American subsidiary LG Electronics USA Inc. and spokesman for Zenith, told Law360 in an email Friday that the lawsuit “is without merit.”
There is more to unravel in this case… stay tuned for more.
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