The dispute between the Business Innovation Fund and LazyTown was heard in the Reykjavík District Court yesterday. When LazyTown was still on the drawing board and there was no way of knowing whether the idea would succeed, the Innovation Fund lent LazyTown more than 20 million ISK. A clause in the loan agreement allows the fund to demand the money back in the form of shares. The giant company LazyTown does not accept that today.
The Innovation Fund lent LazyTown 21 million ISK at the time the company was in its first phase. Now LazyTown has become a giant. Innovation Fund wants the money multiplied back in the form of share capital. LazyTown does not want to allow the Innovation Fund to enjoy the fruits of its success and the case is now in court.
“We would have preferred that the case not go to court,” says Gunnar Örn Gunnarsson, executive director of the Business Innovation Fund, but it has not been possible to resolve the dispute between the fund and LazyTown. “This is about a dispute over a loan agreement,” says Gunnar. “We tried to solve the issue, but if that doesn’t work, people look for other ways. We have good faith that LazyTown, which we have supported so far, will accommodate us. It’s unfortunate that this went to court.”
One in ten
The case of the Business Innovation Fund against LazyTown ehf. was heard in the Reykjavík District Court early yesterday morning, september 2, 2004.
The Innovation Fund is a venture capitalist who seeks to invest in companies that are promising for success. Often nothing comes of the companies, but sometimes they succeed – like LazyTown. These are the investments that keep the fund going and enable it to support other companies for good works.
“We bet on ten companies and maybe reap from one,” says Gunnar árn. “That company therefore has to pay for the other nine, and with that we think we have spent the money well.”
Lazytown wants dismissal
Before the District Court this morning, Tómas Þorvaldsson, LazyTown’s lawyer, demanded that the case be dismissed. Neither the lawyer of the Innovation Fund nor the judge liked that option. If a motion to dismiss is filed, the case will be delayed for several months. The judge therefore made the decision to adjourn the case for a week so that LazyTown’s lawyer could reconsider whether the dismissal claim will be filed or not.
The amount that the Business Innovation Fund lent to LazyTown when the company was still in its first phase is about 21 million. This was a risky investment because there was no way to know if LazyTown would succeed. The loan agreement therefore provided for a so-called conversion right, which enables the Innovation Fund to get the money back in the form of share capital in the company.
Offered a much smaller share
Today, LazyTown has become a giant company and the Innovation Fund wanted to comply with the amendment clause. LazyTown, however, claimed that the conversion right had lapsed. Despite LazyTown’s interpretation, the company offered the Business Innovation Fund to receive shares at a price that took into account the value of the shares on the market today. Thus, the fund would receive a much smaller share in LazyTown than the fund wants and would have received if the 21 million ISK contribution at the time had been provided as share capital. This invitation was to create harmony.
The Sports elf is lazy to answer
The Business Innovation Fund rejected the offer and wanted to get the shares at the “right” price, i.e. the price at which the shares were valued when the loan was granted. Thus, they acquire a much larger share in LazyTown than the company’s representatives want to accept.
Kjartan Már Kjartansson, LazyTown’s information officer, did not want to comment on the matter. Said simply: “No comment” and pointed to Magnús Scheving’s wife – Ragnheiður Melsted. However, she could not be reached. Magnús Scheving himself has just flown to the United States.
[note] Regarding loans with convertible rights with the Business Innovation Fund: “With loans with convertible rights, Business Innovation Fund is unilaterally authorized to change the share capital of the company in question at a predetermined exchange rate. A special loan agreement is made where the conditions of the fund are specified and a requirement is made that the right to convert is entered into the Articles of Association of the company. “The Innovation Fund’s website.
Dagblaðið Vísir – 198th issue-Helgarblað, Page 63
Fearlessness in LazyTown
“This has no effect on the future operations of the company” says Agúst Freyr Ingason, Deputy CEO of LazyTown regarding the lawsuit of the Business Innovation Fund against Magnús Scheving’s company. The case was heard in the Reykjavík District Court on Thursday. LazyTown does not accept this and Ágúst Freyr says that they will take the matter seriously.
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