We’ve been talking about the shit potentially hitting the fan for a while now with Xyience and while no poop has flown yet, it certainly looks like it’s being primed to fly. Basically the Fertittas have been named as defendants in a case involving Xyience’s original shareholders:
On March 13 the plaintiff shareholders amended their complaint to include Fertitta Enterprises and Zyen, private companies owned by UFC co-owners Frank and Lorenzo Fertitta, as defendants. The complaint alleges that Zyen and Fertitta Enterprises aided and abetted Xyience’s corporate directors in breaching their fiduciary duty to shareholders as well as engaged in a conspiracy to defraud shareholders.
The source of the allegations is the Fertittas’ $12 million loan to the company last fall. According to the complaint, the loan was repayable in one year with a 15-percent interest rate and collateralized by all of Xyience’s assets. The terms also allegedly included warrants for 10 percent of capitalization of the company at one cent per share and 50 percent of the company’s equity if Xyience failed to repay.
Thus in the event of default, the Fertittas could purchase 60 percent of Xyience’s stock for a nominal purchase price. Additionally, the default provision would also be triggered if the shareholders voted to remove any members of the board.
The complaint alleges that this loan “was neither in the best interests of the shareholders or the company. Indeed, the Fertitta funding did not fund Xyience. Rather, it provided Xyience funds that were immediately used to fund a debt owed to the Ultimate Fighting Championship, which is owned by the Fertittas.”
We’ve outlined the situation a few times but let me do it once more: CEOs with connections to the Fertittas are put in place at Xyience. The CEOs make retarded deals with the Fertittas where they accept a loan which immediately gets paid to the UFC. Since the money was used to pay the UFC instead of paying for uuuh, stock to sell, Xyience had no way to earn money to pay back the loan. Xyience defaults on the loan, and the Fertittas take over the company.
Basically at this point it looks like the people running the company took the loan specifically to fuck Xyience over and allow the Fertittas to take control. This would be all well and good if it wasn’t for all the original stock holders who have basically been left holding their dicks.
I’m hoping that the next FightOpinion radio has a bit of Judge Jeff Thaler in it to talk about the legal ramifications of such a situation. At this point I’ve seen enough to think that the Fertittas were definitely involved in fucking Xyience over. The only question is if they can be on the hook for it legally.