
The Extraordinary Happenings At BitTorrent - makimaki
http://www.techcrunch.com/2008/12/15/the-extraordinary-happenings-at-bittorrent/
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pg
I'm impressed with the way Arrington is digging into this. I feel like if he
didn't, nobody would, and we'd never know what had happened.

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nickb
From Arrington's reporting, it looks like minority shareholders were squeezed
out (not bought out) and cap table was heavily modified. It doesn't matter how
careful you are and how right you think you are, when you make a decision to
wipe out holdings, a lawsuit or a threat of lawsuit will eventually come and
minority will have a strong case against the board. No wonder none of the
board members talked to Mike and no one gave statements for the record... they
know they'd be exposing themselves to liability.

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mattmaroon
Man I hope we get to hear the whole story on this one when the smoke clears.
This is so damn unusual, a company voluntarily giving up money and valuation
for no reason, that there almost has to be more to it.

The only thing I can think of that would explain this is that the company was
caught having lied about something significant during the due diligence
process, and this was an effort to stave off an investor lawsuit. It's either
that or someone got ripped off, or I'm missing something.

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epe
> Cohen, who has recently had highly publicized financial troubles, may have
> simply been bought off.

[citation needed]

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bentoner
Could "recently" mean 2003?

[http://www.nytimes.com/2004/02/12/technology/circuits/12shar...](http://www.nytimes.com/2004/02/12/technology/circuits/12shar.html?ei=5070&en=d68c5e73d7e48eb7&ex=1229490000&pagewanted=all&position=)

 _While writing the software, "I lived on savings for a while and then I lived
off credit cards, you know, using those zero percent introductory rates to use
one credit card to pay off the previous card," Mr. Cohen said..._

 _"This past September [of 2003] I had, like, no money," he recalled. "I was
just scraping along and doing the credit card thing again."..._

 _All along, Mr. Cohen had accepted donations from BitTorrent users at his Web
site, bitconjurer.org, but the sum had been minimal. In October [of 2003],
however, Mr. Cohen's father prevailed on him to ask a bit more directly. Now
[2004], Mr. Cohen said, he is receiving a few hundred dollars a day._

 _"It's been a pretty dramatic turnaround in lifestyle in just a few months,
with the job [at Valve] and the donations coming in," Mr. Cohen said. "It's
nice."_

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shadytrees
> _They weren’t generating much revenue from toolbar and device installations
> - just $5 million or so annually._

There is no God.

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prospero
They had 65 employees and $50 million in funding. They were obviously planning
on making a little bit more than $5 million a year.

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shadytrees
> _They were obviously planning on making a little bit more than $5 million a
> year._

Actually, that seems like one of their biggest problems.

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tptacek
Why you don't want to pay money for private company common stock, example N.

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Retric
If you where harmed you can still sue. IMO someone will and anyone on the
board who voted for this should probably be sent to jail. However, most of the
time these things are kept quiet.

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tptacek
Just to lob a grenade into this discussion, you often can't _really_ sue;
lawsuits take years to resolve and cost tens or hundreds of thousands of
dollars to pursue. You have to be out very real money, and have a strong
chance of being able to recover it in 3 years (when the company is likely to
be dead), for it to even be rational to take something to court.

One place where you absolutely can muck things up as a jilted common stock
holder is during M&A activity; I've seen a couple deals screwed over legal
issues that looked minor to me at the time.

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kragen
Also, if you want to found a company later, it might be easier to get VC from
VCs who you aren't currently suing.

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rthomas6
I am kind of confused. Is what happened legal?

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cstejerean
We'll find out soon enough, I'm expecting some kind of lawsuit as a result of
this.

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netcan
Hopefully anyway

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ars
Can someone explain _what_ they did? If I read this correctly they took away
all the shares from everyone and gave them to other people? Is that right?
Because it doesn't make sense, so I must have misunderstood it.

How can you just wipe out the value from existing shareholders? Don't they own
the company? How can you just take that away?

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Devilboy
They issue new shares. Let's say each shareholder has 100 shares, they might
issue 10,000 new shares to sell which means your shareholding gets massively
diluted unless you buy a large portion of the new shares.

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ars
_Who_ issues shares? Isn't the company owned by the people who have shares? So
aren't those people the ones issuing shares?

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kragen
The company issues shares, but it is a separate entity from its stockholders.
The money acquired by selling the shares goes to the company, not the existing
stockholders. It results in the company being more valuable, and the existing
stockholders (or the board of directors on their behalf) can think this is a
worthwhile thing to do if they think the money will be invested well by the
company.

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pclark
i really wish we had less techcrunch on the front page.

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dcurtis
This article is the most interesting I have seen on techcrunch in a while. It
really is an extraordinary event, and Arrington has actually done a great job
reporting on it.

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bootload
_"... This article is the most interesting I have seen on techcrunch in a
while. It really is an extraordinary event, and Arrington has actually done a
great job reporting on it. ..."_

I think you nailed it there. Having some legal training has paid off with a
nice summary of the situation?

 _"... So why did Cohen agree to vote for the transaction? Speculation
abounds, but one aspect of the transaction is suspicious ... That mostly means
Cohen, who is reportedly getting the lion’s share of the 30% of the company
put aside for current employees. Cohen, who has recently had highly publicized
financial troubles, may have simply been bought off ..."_

But ... here we have an allegation that might have a simpler explanation. I
found this article in 'Business Week' article, _"BitTorrent's Bram Cohen Isn't
Limited by Asperger's"_ ~ <http://news.ycombinator.com/item?id=399039> reading
through his blog.

Don't let the lack of facts or another possible explanation get in the way of
a good story.

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kragen
What does the BusinessWeek article have to do with the company buying back
common shares?

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quantumhobbit
I think he implied that Cohen's Asperger Syndrome allowed him to be
manipulated into this position instead of simply being bought off. I think
that if Cohen is high functioning enough to write a successful p2p standard
and start his own company, he can understand what is going on in the board
room. Either way something fishy is going on.

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kragen
That doesn't seem plausible; people with Asperger's are harder to manipulate,
not easier, especially when they're smarter than you are. Although Asperger's
creates its share of frustrations, being unduly influenced by one's emotions
and easily influenced by other people's opinions are not among them.

That said, it might be what the person who posted the BusinessWeek article was
thinking about, if he's a fucking idiot with a neurotypical-centric attitude
problem.

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dhimes
I don't know why you were downmodded--your first paragraph is spot-on. Your
second paragraph/final sentence is a reasonable, if ill-phrased, speculation.

