“Audio-equipment maker Monster LLC and its chief executive sued Apple Inc.’s Beats Electronics LLC, its co-founders Jimmy Iovine and Dr. Dre, and Taiwanese smartphone maker HTC Corp. for allegedly conspiring to dupe Monster out of a deal with Beats before the company was sold to Apple for $3.2 billion last year,” Daisuke Wakabayashi reports for The Wall Street Journal.
“In a complaint filed in Superior Court in San Mateo County, Calif., Monster said Beats ‘fraudulently acquired’ the Beats by Dr. Dre line of headphones through a ‘sham transaction’ with HTC, which agreed to purchase a 51% stake in Beats for $300 million in 2011,” Wakabayashi reports. “The complaint asserts that Beats repurchased 25.5% of its own shares from HTC less than a month after the deal closed, allowing Beats to end its relationship with Monster due to a change-of-ownership clause. Monster helped launch the Beats brand of headphones, a flashy and pricey line of music accessories that proved popular among celebrities and teenagers, in July 2008. Monster said it developed, manufactured and distributed the headphones in exchange for the licensing rights to the Beats brand and celebrity marketing by Mr. Iovine and Dr. Dre, whose real name is Andre Young.”
“Worried about a lack of transparency at Beats after the HTC deal, Monster CEO Noel Lee also reduced his 5% stake in Beats to 1.25%,” Wakabayashi reports. “In September 2013, eight months before Apple agreed to buy Beats in May 2014, Mr. Lee sold his remaining shares. In the suit, Mr. Lee alleges he sold the shares after being misled by a board member that no ‘liquidity event’ was on the horizon for the next year or two. But Monster’s suit said Mr. Iovine and Apple Senior Vice President Eddy Cue later told a technology conference that the deal was several years in the making. Apple isn’t named as a defendant in the suit.”
Read more in the full article here.
MacDailyNews Take: Wouldn’t being told by a board member “that no ‘liquidity event’ was on the horizon” constitute insider trading? Did the public have an opportunity to query Beats board members about the possibility of suitors?
[Thanks to MacDailyNews Readers “Fred Mertz” and “Bill” for the heads up.]
Monster CEO sounds a little bitter over Apple’s planned $3.2 billion Beats acquisition – May 14, 2014
Apple sues headphone entrepreneur for claiming to be Beats co-founder – September 30, 2014