On2 shareholders unhappy with Google deal

Google's acquisition of video-compression software company On2 Technologies is being challenged in court by On2 shareholders dissatisfied by Google's $106.5 million offer.

The lawsuit, which was filed Monday in Delaware Chancery Court, seeks class action status and a permanent injunction against the deal. The suit, first reported by the New York Post, also seeks an accounting of all damages caused by the defendants Google and On2's board of directors.

On2 declined to comment, and Google did not immediately respond to requests for comment.

Under the terms of the stock swap, which was announced earlier this month, each share of On2 will be exchanged for 60 cents' worth of Google common stock--a 57 percent premium over On2's closing stock price on the last trading day before the announcement. The complaint notes that On2's stock traded at 65 cents in May and reached as high as $1.16 in 2008.

The lawsuit also alleges that On2's board agreed to provisions that prohibit the company from entertaining other offers.

The deal, which is expected to close in the fourth quarter of this year, still needs the approval of On2 shareholders, but the board has yet to announce a date for the vote.

On2's video-compression technology is used in Adobe's Flash software and the Hulu video site, among others. The company licenses various "codecs"--the software used to encode video so it's compact enough to squeeze down a narrow Internet pipe, then to expand it at the other end.

[myles taylor]

So they are suing because Google isn't offering enough money? That seems......really weird. What "damages" where there. I don't get it.

[EvanSei]

google hurt there feelings and made them cry, now they want mommy to ground google and send it to its room.

[eltoro2827]

Goggle suxs

[BIGELLOW]

Ummm... "The complaint notes that On2's stock traded at 65 cents in May and reached as high as $1.16 in 2008." OK, sure... and the economy was different in 2008 than it is now, just as it was different in May than it is now. Are they saying that Google needs to turn back the clock and pay them what they were worth in the past? C'mon, people... really.<br /><br />Maybe I can sue the U.S. Government because the unemployment rate is so high.

[jonnydas]

The above posters have zero information regarding the company, Ontrak, or the significance of a video codec to the future of video dissemination over the internet and mobile devices. Well, that's par for the course. Many people do that. A video codec is key to transmission of video over telephone and cable lines and wirelessly. There are just a few viable video codecs, those sophisticated enough to condense a video file at one end, remove redundant information frame to frame then put it back together at the other as it decompresses into a visual image. ONT's codec is widely regarded as the best, producing an image that is on par with that on your television screen. A codec is key to expansion of video to mobile devices which is the next step in the video revolution. Advertisers are chomping at the bit awaiting the day when an ad goes to not millions but billions of eyeballs in one transmission. Do you realize how much money is involved here? ONT's VP8 codec not only appeals visually, it is also able to be used cross-platform--TV internet and mobile. GOOG only goes for the best. ONT is the first publicly owned company it has ever purchased. The company did NOT do its DD, understanding the passion of the owners of the stock who understand the value of a codec to the future of the Internet itself which is surely video-based. The fight will go on to get from GOOG or another company what we feel is a minimally just price for the billions that ONT's codec will bring to GOOG's coffers.

[myles taylor]

I understand rejecting an offer because you don't think it's worth it. You may be right on that. I even understand suing the board of directors for entertaining a low offer. But suing someone for making an offer that is too low? That doesn't make any sense whatsoever.

[irperez]

Can we say Monopoly? Contract so that On2 can't get other offers?!

[Grab_your_ankles]

November 6, 2008 - 5:00 PM Eastern<br />Third Quarter 2008 Results Conference Call<br /><br />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."

[Grab_your_ankles]

November 6, 2008 - 5:00 PM Eastern<br />Third Quarter 2008 Results Conference Call<br /><br />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."<br /><br />On Thursday August 6, 2009<br />On2 Technologies Announces Financial Results For Second Quarter of 2009<br /><br />"Matt Frost, interim CEO of On2, said the company ?delivered our strongest revenue performance in six quarters.?<br /><br /> 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?

[Grab_your_ankles]

If you want to know why shareholders are outraged listen here:<br /><br /><br />http://wayonda.com/index.php?page=videos&#38;section=view&#38;vid_id=100106

[Grab_your_ankles]

If you want to know why shareholders are outraged listen here:<br /><br />http://wayonda.com/index.php?page=videos&#38;section=view&#38;vid_id=100106