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Sale of social website targeted

Former executives must face shareholder claims that MySpace was sold for too little, a federal judge rules.

August 01, 2008|From Bloomberg News

Former executives at Intermix Media Inc., the MySpace developer now owned by News Corp., must face claims they misled shareholders by allegedly selling the website for billions of dollars too little, a federal judge said.

The ruling by U.S. District Judge George King in Los Angeles was lauded by MySpace founder Brad Greenspan, who said the social networking site was intentionally undervalued when it was sold in 2005 for $580 million.

"I knew that the value of the company was billions of dollars. However, the deceptive practice of hiding MySpace financials by Intermix management robbed shareholders of their opportunity to adequately gauge the company's value," Greenspan said Thursday.

Former Intermix Chief Executive Richard Rosenblatt and ex-President Brett C. Brewer were accused in the suit along with several directors of undervaluing MySpace to reap personal financial gain from the sale.

The suit also names the company's lenders and its venture capital firm, VantagePoint Venture Partners.

King, in his ruling issued July 14, dismissed four claims against the group, including allegations of securities violations. The remaining two claims allege that the executives violated their fiduciary duty, or aided and abetted such violations, by making misleading statements to Intermix shareholders before the News Corp. acquisition.

The suit, filed in 2006, claims that MySpace was worth as much as $20 billion. According to an amended complaint, News Corp. last year considered selling MySpace to Yahoo Inc. in a deal that valued the website at about $12 billion.

MySpace spokeswoman Dani Dudeck didn't return a call seeking comment.

News Corp. spokesman Jack Horner declined to comment. Elizabeth Moriarty, a lawyer for defendants including VantagePoint, didn't immediately return a call.

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