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When streaming-gaming company OnLive succumbed to its debt this summer, venture capitalist Gary Lauder swooped in to purchase the business’s assets for just $4.8 million.
Insolvency Services Group, which is the firm guiding OnLive through this bankruptcy-like financial maneuver, will use the money to pay back OnLive’s creditors. But that $4.8 million won’t make up for the Palo Alto, Calif.-based corporation’s reported $18.7 million in debt.
The San Jose Mercury News is reporting that ISG’s chief executive officer, Joel Weinberg, wrote a letter to OnLive’s creditors informing them of the details of this sale and that they shouldn’t expect more that $.26 paid back for every dollar lent. Weinberg wrote that OnLive’s turn to insolvency management came after it attempted to attract new investors or a potential buyer for a “substantial” amount of time.
OnLive began this restructuring in mid-August. It laid off its entire workforce and then sold off its assets to a new OnLive that Lauder would own. Lauder’s OnLive is not bound to the previous company’s financial commitments. It’s a seemingly shady practice, but it abides by California state law.
The successor company rehired a portion of the laid off OnLive staff and kept the streaming operations intact.
Prior to its hardships, OnLive attracted more than $200 million in investment funding from large technology companies like AT&T and HTC. It burned through that cash and was worth nearly a tenth of that value when Lauder made his offer.