“We are extremely happy that the shareholders bet on Magnús Scheving” says Gunnar Öm Gunnarsson, the managing director of the Innovation Fund, on the occasion that the Reykjavík District Court ruled in favor of the fund in a case against LazyTown.
The fund invested 20 million in Magnús’s project and wanted those millions refunded. LazyTown refused, but the result now is that the Innovation Fund’s 20 million credit has probably multiplied due to LazyTown’s success. “You bet on many horses, but not many of them make it to port. We wish Magnús Scheving all the best” says Gunnar. Magnús could not be reached yesterday because he was filming.
Morgunblaðið – Volume 92 2004, Issue 328, Page 12
Björgvin Njáll Ingólfsson, an expert at the Innovation Fund, says that the fund usually does not lend money, but rather buys equity in companies. When loans are granted, on the other hand, it is common to stipulate that the fund can convert it into equity, as was done when LazyTown received a loan of 20 million in December 2001.
Björgvin says that at that time the company was in serious need of risk capital and its operations were not guaranteed at all. Björgvin says that the relations with LazyTown have always been very good and he thinks it is bad that there should have been litigation, that the fund went to great lengths to reach an agreement. In the end, he was then awarded capital similar to the amount he demanded. Björgvin reminds that the fund invests in risky investments. According to the nature of the case, there can be a loss on such investments, and it is therefore important that the fund enjoys a profit when things go well.
In total, the Innovation Fund lent 30 million to LazyTown. 10 million has already been converted into share capital, and according to the judgment, an additional 20 million must be converted into share capital. The fund therefore owns just over 2% in the company. Considering that the value is 3 billion, the fund has received a 100% return on the investment.
The case will not be appealed by the Innovation Fund. A spokesman for LazyTown says that they are considering whether the verdict will be appealed to the Supreme Court. According to the company and not the district court, these expenses were anticipated by the company before the right of conversion lapsed.
Fréttablaðið – Volume 4 2004, Issue 329, Page 14
Reykjavík District Court has ordered LazyTown to hand over equity in the company to the Innovation Fund due to a 20 million ISK loan that the fund granted it at the time. Ágúst Freyr Ingason is the assistant director of LazyTown.
Are you going to appeal?
The company’s board of directors has yet to take a position on it.
What is the value of the capital that Innovation Fund receives?
In the media, people have mentioned more than 50 million ISK.
Does this affect the business?
No, last week we were finalizing sales contracts in Germany and Canada. It has a much greater impact on the company’s operations permanently, but this is a court case.
Aren’t you rich men then?
You can hardly tell. We are still selling the shows and it also costs a lot to produce them. But we have had good success in the US and we are trying to follow it elsewhere.
But shouldn’t you have just let Innovation Fund have this capital?
It was a dispute over the interpretation of the contract and we had already tried to reach a settlement. They decided to go the judicial route.
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