OnLive was at least $30 million in Debt Before Upheaval
Cloud-gaming company OnLive owed between $30 to $40 million to creditors before it was purchased by Lauder Partners and resurrected as a new company, reports Silicon Valley newspaper, Mercury News. The revelations come courtesy of the Insolvency Services Group, which took control of the company when it couldn’t pay its debts and sold its assets to Lauder. ISG’s CEO, Joel Weinberg, explained the crisis OnLive faced leading up to its self-inflicted demise and rebirth this past weekend.
“It was a company that was in dire straits. It only had days to live in terms of cash flow and the like. Something had to be done immediately or there would have been a hard shutdown, which would have been a disaster.”
Instead of filing for bankruptcy, OnLive filed for “assignment for the benefit of creditors,” which put the company in the hands of ISG. Lauder was able to then buy the company and its assets—though none of its stock—and start a new company with the same old name. The company’s employees were all laid off, with half of them being rehired by the new entity, and supposedly no interruption in the services provided by OnLive. Anyone who held stock in the company now owns shares that are worth exactly zero.
If it seems as though the employees were the biggest losers in this whole situation, that’s probably not the case. In addition to the rehires, the company said on Monday that the rest of the employees would be offered positions as consultants, which seemed as though everyone would still be making some money in OnLive’s new reality.
No, the biggest losers are the creditors. According to the Mercury News article, they’ll be receiving five to ten cents on the dollar from what OnLive’s previous incarnation owed. Not the best return on an investment.
Via Mercury News