OnLive closes, re-opens to avoid debts
August 20, 2012 | 11:07
Troubled times are brewing at cloud gaming pioneer OnLive, which has been going through some interesting legal wrangling in order to stay afloat - even, at one point, laying off its entire staff.
OnLive's staff were reportedly given the boot last week, while the company continued to release statements to press denying any problems and declaring things to be absolutely A-OK. These statements have since been revealed as ever-so-slightly misleading, but the company has declared that things are business as usual for its customers.
To avoid bankruptcy, OnLive has decided to create a new company - a manoeuvre known as a Phoenix company after the mythical bird which is re-born in fire - in a restructuring which sees the original OnLive closed and its debts unpaid. The new company, which is also called OnLive, will pick up the pieces and continue as normal without the burden of debt the original OnLive enjoyed. For clarity, we'll refer to the original and now closed company as OnLive-1 and the new, business-as-usual company as OnLive-2 throughout.
Speaking for both OnLive-1 and OnLive-2, the company's board has issued a statement explaining that OnLive-1's assets were transferred to a third-party who then sold them on to OnLive-2 - neatly bypassing rules on simply changing the name of your company to continue operations while avoiding debt repayment.
The stockholders, meanwhile, get bupkis: only assets were transferred to OnLive-2, meaning that investors in OnLive-1 have just seen their money disappear and their shares rendered worthless. Shares in OnLive-1 will not, in other words, be exchanged for shares in OnLive-2.
But what about the company's employees? 'Almost half of OnLive's staff were offered employment at their current salaries in the new company immediately upon the transfer, and the non-hired staff will be given offers to do consulting in return for options in the new company,' OnLive-2's statement to press explains. 'Upon closing additional funding, the company plans to hire more staff, both former OnLive employees as well as new employees.'
The offer of options - a promise to be able to buy stock in a company at a certain price at a future date, and the means by which many early tech start-up employees become stinking rich - will likely come as little comfort to the employees not being re-hired by OnLive-2: after all, the board has already shown that it has no problem rendering stock worthless by closing down OnLive-1.
For customers, OnLive-2 claims everything is going to be just fine. 'Users should see no change in the OnLive Game or Desktop Services.' the company explains in its statement. 'All of their purchases remain intact and available.
'The asset acquisition, although a heartbreaking transition for everyone involved with OnLive, allows the company's core innovation and ongoing offerings–the product of over a decade of hard work transforming the OnLive vision into reality–to survive-and continue to evolve.'