By Sahil Patel
Disney agreed to buy Maker Studios for at least $500 million (and as much as $950 million) last month. Upon shareholder approval, it would be the biggest bet on a YouTube business to date — unless ousted Maker Studios CEO Danny Zappin gets his way.
Zappin, one of the founders of Maker Studios, is asking a California district court judge to issue a temporary restraining order to delay the vote on the sale, which is scheduled for Tuesday, April 15.
In his application for a temporary restraining order, in advance of an injunction motion, Zappin’s attorneys essentially make the claim that the shareholder vote should not happen because the defendants — Maker Studios executive chairman Ynon Kreiz, founders Ben Donovan and Lisa Donovan, investors Dana Settle and Mark Suster, among others — did not provide Maker shareholders with accurate and complete information for an informed vote to happen.
Specifically, the application argues that the notice for merger agreement and other documents sent by Maker Studios to its shareholders on March 31 are “defective and misrepresent and omit material facts necessary for Maker’s shareholders to make an informed Merger vote.”
This all stems from a lawsuit filed last June by Zappin, Scott Katz, Derek Jones, and Will Watkins, which accused the Maker board of various breaches of “fiduciary duties” and “embezzlement of corporate assets.”
The central element to this new suit is the previous lawsuit’s argument that the Maker board illegally “issued shares to themselves and diluted the common stock for their own financial gain to the detriment of other Maker shareholders and take control of Makers’ board so that they could ‘rapidly create a ‘liquidity event’’ so that they could sell Maker and obtain significant returns on their investments irrespective of the best interests of Maker and to the detriment of Maker and its shareholders.”
A mouthful, yes. But in short, according to the plaintiffs, the Maker board used shady tactics to oust Zappin as CEO, get more shares for themselves, and chase an acquisition (“the liquidity event”) as fast as possible, regardless of how that affected Maker shareholders.
Maker Studios, for its part, denied the claims of the original lawsuit, which came a month after Zappin relinquished his CEO role to Ynon Kreiz.
The defendants are requesting the court to throw both cases out, claiming that neither have any merits.
And for what its worth, Disney, which we’re sure did its due diligence on the ongoing legal situation with Zappin before deciding to buy Maker, is not named in this new suit.
If the judge agrees with Zappin and the plaintiffs, though, this could get really interesting.
Maker Studios reps did not immediately respond to a request for comment.