Social Network Bebo Has Filed A Voluntary Chapter 11 Bankruptcy Petition

Posted: May 10, 2013 in GT, Social

20130510-204730.jpg
Looks like Bebo, once an early star in social
networking, is progressing to the next step in the long
and messy struggle between majority shareholder
Criterion Capital Partners and minority shareholders
that include co-founder Michael Birch, Hecker
Consultancy and SV Angel: Bebo.com, Inc. has filed a voluntary petition for Chapter 11 Bankruptcy in the
Central District of California. First spotted by the blog
Chapter 11 Cases, this appears to be the latest
development in a case that was first filed in February
of this year, in which some of the smaller
shareholders requested for the courts to appoint a receiver to take control of the company after they
judged that it had been mis-managed by Criterion. This appears to be what happened. According to the
Chapter 11 filing (embedded below), the receiver that
got appointed in the Bebo case, after the February
motion, was Michael Ong, who is listed as an
investing partner at Burke Capital Corporation.
Burke lists as its specialties “Capital Sourcing, Crisis Management, Growth & Value Accretion, Exits &
Harvest.” We have also reached out to Ong for more
detail on what comes next — whether it will be a sale
of whole or part of the assets with an attempt to
restructure the remaining business. Chapter 11 Cases lists the largest unsecured
creditors in the case as the “IRS ($380,000); Criterion
Capital ($314,000 – disputed); AOL Advertising
($120,900 – subject to setoff, according to Bebo);
Quality Technology Services ($120,000) and e-DBA
Limited ($43,571).” The February suit, as we reported at the time, might
lead to the removal of Adam Levin as Bebo’s CEO.
And according to his LinkedIn profile, the appears to
be what happened, with his role as CEO at the
company ending in February 2013 (although,
confusingly, under his name on his profile card, Levin still lists “chief executive officer at Bebo”). Levin is
also MD of Criterion Capital Partners, a position he
retains. We have reached out to Levin, as well as two of the
shareholders, Michael Birch (also one of the co-
founders) and Richie Hecker of Hecker Consultancy,
for more detail. Once a fast-growing social network that was
particularly popular in the UK and Ireland — in the UK
in 2008 (when Facebook was much smaller) it
claimed to have 40 million users who spent an
average of 40 minutes each on the site. Bebo was
bought by (TechCrunch owner) AOL for $850 million in 2008 but then sold to Criterion for $10 million only two
years later. Prior to the February 2013 motion, in April 2012,
minority shareholders had filed a $5 million suit
against Criterion for “destroying” the site, in their
words. Competition from much bigger and stronger
players like Facebook may have been the biggest
pressure on Bebo — which turned to various avenues like original video content to drum up more usage
(perhaps ahead of its time, considering the move
once more to online original video content) but the
shareholders allege that the site’s owners didn’t help
that situation. After apparently defaulting on a lease for its San
Francisco offices, Levin then allegedly moved the
company down to Los Angeles without consulting the
board — LA is where Bebo is now listed as being
headquartered on current Chapter 11 filing. The
lawsuit also claimed Levin paid himself $14,000 a month as CEO even though he wasn’t working full-
time at the company and was focused on other work
for Criterion. Moreover, the company didn’t hold any
board meetings for at least 20 months and didn’t turn
over financial information about the performance of
the company over to the board. The February 2013 motion added more kindling to that
fire, claiming that Levin didn’t pursue leads for the
sale of Bebo to interested parties like Tagged and
AdKnowledge, with the latter offering to pay $15
million plus a $15 million earnout. On the consumer front, Bebo has also been
somewhat quiet: the site’s official Twitter account
hasn’t been updated since November 2012, and its
@TeamBebo support account has not tweeted since
2011. It’s suffered a few bouts of downtime, too, the
most recent being earlier this week.

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