Myspace.com Founder Issues Report Finding News Corp.’s Myspace Acquisition Defrauded Shareholders of More Than $20 Billion
Report Calls for Further Investigation into Self Dealing, Insider Trading, Options Acceleration and Unfair Process Related to Purchase
LOS ANGELES--(BUSINESS WIRE)--Brad Greenspan, founder of Myspace.com, today issued an online report at Freemyspace.com that details how Intermix Media, Inc.’s sale of Myspace intentionally defrauded shareholders out of tens of billions of dollars. Saying it is “one of the largest merger and acquisition scandals in U.S. history,” Greenspan is calling for further investigation by the Securities and Exchange Commission, the United States Department of Justice and the United States Senate Committee on Finance. Greenspan served as chairman and chief executive officer when Myspace was created by Intermix.
“In addition to Rosenblatt’s stunning and incriminating emails, the two highest non-director senior executives, chief financial officer Lisa Terrill and chief operating officer Sherm Atkinson, have come forward through their legal counsel indicating significant breaches of fiduciary duty by Rosenblatt and the directors as part of the News Corp. transaction”
“The answer to how News Corp. was fortunate enough to buy one of the largest and most valuable Internet companies for pennies on the dollar is now clear,” said Intermix’s largest individual shareholder and Myspace founder Brad Greenspan. “I expect as the authorities get their arms around what happened, that this transaction will be unwound and Myspace will be independent. An independent Myspace is significantly better for its users and shareholders.”
“For the first time the public can read what took place behind the scenes and how shareholders were blatantly misled into voting for a quick and unfair sale to News Corp.,” continued Greenspan. “Deliberate steps were taken to withhold and manipulate information; money was improperly gained and laws were broken. It is my hope that regulatory bodies will begin their investigations quickly before evidence is destroyed.”
Greenspan utilized a variety of sources for The Myspace Report, including the two highest non-director senior executives at Intermix, chief financial officer Lisa Terrill and chief operating officer Sherm Atkinson, financial analysts, and Kroll, Inc., a risk consulting company. The report shows Intermix chief executive officer Richard Rosenblatt knew before the transaction that Myspace was well on its way to becoming worth at least $20 billion.
“In addition to Rosenblatt’s stunning and incriminating emails, the two highest non-director senior executives, chief financial officer Lisa Terrill and chief operating officer Sherm Atkinson, have come forward through their legal counsel indicating significant breaches of fiduciary duty by Rosenblatt and the directors as part of the News Corp. transaction,” continued Greenspan.
The report concludes that certain Intermix board members and senior executives, led by Rosenblatt, blatantly deceived shareholders into voting for a quick sale to News Corp. in exchange for broad protection from a string of prior corporate misdeeds and Rosenblatt’s understanding that he would share in $20 billion in value post-transaction via his new role at News Corp.
“This is your show and I am looking forward to supporting the 20B dream!”
-- Rosenblatt (Intermix) e-mail to Ross Levinsohn (News Corp.) on July 13, at 11:49 a.m. (four days before signing the transaction with News Corp.)
“Snipet of the press playa. You will be famous…now 20B”
-- Rosenblatt (Intermix) e-mail to Ross Levinsohn (News Corp.) on July 18, at 8:19 p.m. (on the day the transaction was announced to the public)
Rosenblatt’s scheme was helped in large part because Intermix hid Myspace revenue from shareholders in a blatant violation of FAS 131 (segment reporting disclosure). Shareholders were not aware that Myspace’s revenue was growing at a 1200 percent annualized rate and increasing. Shareholder’s were forced to trust the recommendation of Intermix’s Board and were under the impression Myspace was unable to turn its massive traffic into revenues.
“A public company that refuses to tell shareholders the revenue of its most valuable asset flies in the face of what it means to be a public company” said Greenspan
Approximately six-months after the deal closed, News Corp. disclosed to analysts that Myspace was tracking at $250 million in revenue in 2006 and announced an advertising deal for Myspace with Google for $900 million dollars. Peter Chernin of News Corp. was quoted by the Financial Times on Aug 7, 2006:
“In one fell swoop we have paid off two-thirds of our Internet investments. We have gotten a 70 percent premium on our Myspace investment and are now playing with house money.”
“If Intermix had abided by FAS 131, shareholders would have been able to track the revenue and growth of Myspace and known the property was on pace to hit the eye popping numbers we are now seeing,” said Greenspan. “Myspace didn’t magically start generating revenue after the News Corp. transaction, its revenue and growth were tracking to reach $250 million before the acquisition.”
Among the report’s findings are:
“News Corp.’s valuation has increased by $12 billion since the transaction occurred just one year ago, and there are several independent analysts today that agree that Myspace is worth tens of billions of dollars,” Greenspan added. “It is time everyone knew the truth about the ‘hijacking’ of Myspace and the individuals responsible for this eye popping theft.”
In February, Greenspan filed a complaint against Intermix and VantagePoint Venture Partners in the Superior Court of California County of Los Angeles. The complaint stated that in 2005, News Corp. purchased Intermix (which owned Myspace), in a cash-out merger as a result of an unfair process and at an unfair price that did not reflect the recent growth and future prospects of Myspace. Mark Hansen and Kevin Huff of Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C; are lead counsel in the matter.
Another shareholder lawsuit has recently been filed in Federal Court which includes Montgomery Securities and Thomas Weisel as defendants for their role in creating misleading information in the Intermix Proxy and Fairness Opinions among other acts.
About Myspace and Brad Greenspan
Among the Intermix properties acquired by News Corp. was Myspace.com, a social networking Web site with Web profiles, blogs, instant messaging, e-mail, music downloads, photo galleries, classified listings and chat rooms that allows users to create their own online community. MySpace.com has more than 100 million registered users and is rapidly growing.
Brad Greenspan, founder of Intermix Media where he led the creation of Myspace.com. Currently he serves as an investor and strategic business advisor for successful start-up companies in high-growth markets. He invests capital and resources that enable companies to meet their short- and long-term business objectives. Greenspan recently launched BroadWebAsia, which is focused on the Chinese internet market.