On2 Shareholders File Lawsuits Trying To Block Google Acquisition (Vote4On2.com)

While many of us in the industry have been trying to figure out what exactly Google will do with On2 after the acquisition, we may be getting ahead of ourselves. Some On2 investors have filed separate lawsuits in New York and Delaware looking to block the acquisition, claiming that On2's board essentially agreed not to shop the company around and look for a higher price. Many of On2's investors are already banding together to stop the deal and have launched a website at Vote4On2.com to make their opinions heard.

While Google announced the deal would close in the fourth quarter of this year, they have yet to announced a date for when On2 shareholders will vote on the deal. Google has agreed to acquire On2 for $0.60 a share but the vast majority of On2 shareholders I have spoken to since the announcement think the company is worth a lot more than that and have said they will vote down the deal. With On2 on a run rate to do around $20M in revenue for 2009, Google's offering price of $0.60 a share puts the deal at $106.5M, or roughly five times revenue, which is not a bad multiple. While I don't know if On2 is worth more than Google is offering and am not a shareholder in any public company, from what I can tell, it sounds like Google may have a real fight on their hands from a large percentage of On2 shareholders.

As of April 7th 2009, there were 175,510,794 shares of On2 common stock outstanding and current directors and named executives only owned 6,001,222 shares, or about 3.33% according to a proxy statement. If all of the individual investors who have voted down the deal on Vote4on2.com do in fact own the number of shares they list, as of today they represent 37,716,990 shares or about 20% of the total outstanding shares in the market.

If there is one thing I have learned about many On2 shareholders in the past it's that they are very opinionated, do a good job of talking to one another and sharing info, are very aggressive in trying to get their message across and always seem to be up for a fight. Not something that works very well on a blog, but maybe just exactly the kind of thing needed to block the acquisition by Google or get Google to raise their offer price.

Comments

[Scott]

This deal stinks to high heaven! ON2 management is derelict in its duties towards shareholders and after this sale is blocked the next action will be to rid ourselves of Frost and the BOD!

This is theft, plain and simple. Matt Frost and the ON2 BOD are only looking out for their interests. Look at the obvious attempts to keep the share price down-especially the naked shorting, and it's easy to see this was an orchestrated plan to defraud shareholders! Google, pay up or get lost.

[preetam mukherjee]

Wow. Now this is news.

I checked out one of the links on their site to this report of investigation(http://money.aol.com/rtn/pr/levi-and-korsinsky-llp-investigates-board-of-on2-technologies-inc/rfid238802458?channel=pf)

They've got a valid point in that if On2 was trading at $0.65 in May, then how/why are they selling for $0.60 in August?

[Roadman]

On2 stats:
(Q1 Mar 09)/2008
Net profit margin -74.40% -314.77%
Return on average equity -94.66% -128.19%
Employees 106 -

Google stats:
(Q1 Jun 09)/2008
Net profit margin 26.88% 19.39%
Return on average equity 19.38% 16.60%
Employees 19,786 -

Weighing-up the short game against the long game
On2 get to sail the google ship into a rising tide. The long term value looks very promising indeed, but I'm sure google could go .5 on the cent just for the haggle.

[J. Tate]

November 6, 2008 - 5:00 PM Eastern
Third Quarter 2008 Results Conference Call

On2 CEO : "We are not positioning ourselves to be bought out. There is a lot more value in On2 than currently reflected in our market cap. I can say with great assurance that is not what we are trying to do."

On Thursday August 6, 2009
On2 Technologies Announces Financial Results For Second Quarter of 2009

"Matt Frost, interim CEO of On2, said the company delivered our strongest revenue performance in six quarters.

So did the value in On2 suddenly drop after their best performance in six quarters? Maybe they are just getting tired of running the show with all of the headaches and wanted some nice fat bonuses and cushy jobs at Google but where is the share holder value in that?

[catchall]

it was 6 quarters ago that ON2 management said they wanted to buy hantro and it would take 6 quarters to incorporate the two technologies and see a growing recurring income stream. That came to fruition with the august quarterly report. To make the Hantro deal they sold shares at $1.06 to raise $20,000,000. The shares have barely traded above $1 in the following 18 months.
The company has consistently said that the game plan was developing as planned. The market has been difficult for 18 month in general and ON2 has been aggressively naked shorted but ON2 has done little to support the share price regarding naked shorting and FTDs failures to deliver both illegal activities if they are investigated by the SEC the supervising agency. Somethings about the spoken of deal smell like 18 month old fish. imo