Gravity4, the 1-year-old ad tech firm founded by the troubled former RadiumOne CEO Gurbaksh Chahal, has made a second bid to acquire public ad tech company Rocket Fuel, according to AdNews.
Like the first bid, this new offer looks unlikely to succeed: The proposed acquisition price is almost the same as Rocket Fuel’s current market cap, meaning investors have zero incentive to accept it.
But last time Gravity4 proposed taking over Rocket Fuel, the latter company’s stock rallied so fast trading was halted. On that basis alone, this new development will be closely watched.
Gravity4 is now offering around $US260 million for the Nasdaq-listed company, AdNews claims, which is a steep step down from the (rejected) $US350 million cash takeover bid Gravity4 launched for Rocket Fuel in May.
Business Insider has contacted both Rocket Fuel and Gravity4 for comment, and we’ll update this article once we hear back.
Chahal appeared to confirm the report on his Facebook page on Monday. He linked to the article and wrote: “Second time is a charm?”
In May, Rocket Fuel’s interim chief executive officer Monte Zweben wrote back to Chahal shortly after receiving his correspondence, saying “the highly conditional and non-customary nature of your proposal does not constitute a credible offer.”
Gravity4 claims it will generate $US100 million in global revenue this year and that the company is valued at $US1 billion. But as a private, one-year-old startup that has built out its ad tech stack by buying distressed, small ad tech companies like Triggit, it’s difficult to independently substantiate those claims.
Rocket Fuel, meanwhile, has a market cap of $US257.5 million and reported a 30% increase in revenues year-on-year to $US120.1 million in its second quarter. It also reported a net loss of $US24.4 million, compared to a loss of $US9.8 millio in the year-ago quarter.
When Gravity4 mounted its initial bid for the company in May, Rocket Fuel’s share price jumped 18% and trading of its stock had to be temporarily halted. The report of the latest bid, published on Monday, does not appear to have had an impact on investors. Rocket Fuel’s stock was up just 1.66% to $US6.13 at the time of writing.
In May, Gravity4 also made a $US67 million bid to acquire Sweden-based, publicly listed ad tech company TradeDoubler. Gravity4 rescinded its bid after it received a letter from the TradeDoubler board, telling Gravity4 to “immediately obtain relevant legal Swedish advice” because the offer was in breach of Swedish takeover regulations. In Sweden, any takeover offers must follow a “strictly prescribed format” and shouldn’t be made public until the company making the offer has performed certain undertakings with Nasdaq Stockholm, TradeDoubler said.
It’s been a somewhat turbulent few months for Chahal and Gravity4.
He was ousted from the previous ad tech company he founded, RadiumOne, in April 2014 after pleading guilty to misdemeanour domestic violence charges — although Chahal maintains his innocence.
In October he was arrested again in a different incident after a woman he was dating alleged he kicked her multiple times. He was released on $US100,000 bail and will attend court on September 11, where a judge will decide if his previous probation order should be revoked. A representative for Chahal and Gravity4 called the arrest report “frivolous and baseless” and “false.”
In April this year, Gravity4’s former SVP of global marketing Erika Alonso filed a lawsuit over the alleged age and gender discrimination she says she suffered whilst working there. She also claims Chahal illegally spied on her during a job interview. Chahal and Gravity4 deny all the claims made in the suit.
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