Something very odd is happening right now at RadiumOne, the San Francisco-based ad-tech company.
Late last week, Business Insider reporters started receiving emails from anonymous sources claiming that the company was in a dire financial state after struggling to raise financing — and that it had just three months of cash left.
On Friday, RadiumOne chief executive William “Bill” Lonergan sent out a memo to staff in which he flatly denied allegations that the company was in financial distress and reassured staff that “jobs are not at risk.”
On Monday, RadiumOne’s former CEO, Gurbaksh “G” Chahal, tweeted that two board members — Vishal Gurbuxani and Krishna Subramanian — had resigned from the board effective immediately.
(Chahal is still RadiumOne’s largest shareholder, even though he was ousted from the company last year after domestic-violence charges against him were made public. The prosecution dropped felony charges, but he pleaded guilty to two misdemeanours, domestic assault and domestic violence, after a plea bargain. He was sentenced to three years probation and ordered to complete a 52-week program that included domestic-violence intervention and to perform 25 hours of community service.)
So what’s going on? Is the company in trouble?
Our investigation into those questions took a somewhat surreal turn over the past few days, and it’s still not entirely clear what to believe.
[email protected]: “URGENT RADIUM ONE SAN FRANCISCO CA”
That was the subject line of an email that Business Insider received from “[email protected]” last Wednesday.
The email, in full, read:
FOR IMMIDIETE [sic] LEAK:
RadiumOne, Inc. in San Francisco, CA is in major trouble. The company has 3 months of cash left. There is no vision from the CEO, the board, or the management team. It’s unfortunate that myself along with 200 employees around the world will lose their job and multiple investors in the company will lose all their money. I hate to report something like this, but a voice must be heard for the 200 employees working hard daily and the investors who have put in millions.
On Thursday, we received another email from [email protected], making similar allegations.
I work in the San Francisco office for RadiumOne. Over the past couple weeks, I’ve overheard the management team talking, and I can confirm we only have 3 months of cash left. The company has been trying to raise capital; week after week we have potential investors walking in, but there has been zero luck. It’s not fair to myself or the 200 other employees that the management team, and board are cheating us like this. I’ve overheard the management today, that after dozens of meetings, all the investors passed on raising capital and no term sheet was issued. RBC was the bank that the Company hired to help raise capital. A lot of people are going to lose their jobs without any notice. I am hoping to make this public so the hard working employees that have worked here for years don’t got stiffed last minute.
Business Insider immediately set to work contacting sources close to the company, to ascertain the claims. Then things got weird.
The ‘anonymous source’ calls Business Insider from Chahal’s number
After sending emails to Chahal and a few board members, Business Insider’s Alyson Shontell promptly received three missed calls from a number that showed up on her mobile phone as “G Chahal.” (Shontell had contact with Chahal last year after he was ousted from his former company, and his number was saved to her phone.)
When Shontell picked up, a woman’s voice said she was the anonymous emailer, offering to connect Business Insider with board members who could confirm what the emails had said.
Shontell asked if the woman realised that the caller ID was identifying her as Chahal. The woman became quite awkward, and the line went silent for a long while. When the woman eventually came back on the line, she said she was just finding a private place to talk.
Shontell again asked why it had said “G Chahal” on her caller ID, to which the “anonymous emailer” replied she didn’t know and that she didn’t know Chahal.
Alyson then asked how the woman got her mobile phone number. The woman replied that Alyson’s number was “everywhere” and that she knows the right people who gave it to her.
Chahal tells Business Insider he isn’t the anonymous source
A conspiracy theorist (which we’re definitely not) might assume that Chahal was behind those anonymous emails all along: Last year he was ousted from the company that he had founded and said publicly he had felt let down by the board over its decision; he had previously sought to regain control of the company (which Radium One refused); he remains its largest shareholder; and his number showed up when the “anonymous emailer” contacted Business Insider.
Why might he want to spread rumours about his former company? So that he could crush its value and he could buy what remained for cheap and return?
Business Insider called Chahal on Friday to put that theory to him.
We first asked why a woman had called using his number.
Chahal didn’t sound surprised that this had occurred and responded that if you Google it, his number is “all over” the internet, and that he used to receive “hundreds” of phone calls.
“I don’t know. I guess there’s spoof apps or whatever the hell else out there. I haven’t phoned, this [a different number, Chahal says, than the one that had called Alyson] is my only number. I spoke to Alyson back in July, I believe, and I started my company back around that time and since then I have obviously [wanted] a clean slate. I don’t have that number. I don’t know who’s playing a game, or who’s trying to spoof my number, or my former number. I don’t have that number,” Chahal said.
We said that it was a bit of a coincidence that someone had called using a number connected to him, offering to leak us details with what was happening at his former company but then claimed not to know him.
He responded: “I don’t know what you’re talking about there. I know there’s a lot of crazy people out there and there’s a lot of disgruntled employees out there. I know that my number was publicly available through Google, so you know, months ago, I changed it for the very reason that I want to keep my life more private and it not being so easily accessible. It’s very easy to go ahead and spoof someone’s number and hopefully that was the case and [Shontell] gets to the bottom of it.”
We then put our theory to him — that Chahal might want to devalue the company so that he could buy it back at a knockdown price. He said: “I have no desire to acquire RadiumOne or be part of it, the situation as it is [Chahal’s findings about the current financial situation at RadiumOne tallies with the story sent to us via email]. I’ve tried to help them out; that’s a separate [issue.] I acquired Triggit last week … so I have no desire or capital to go ahead and be involved in something. I actually was hoping there would be a material outcome because I’m the largest shareholder. Don’t you think that it would be more my benefit than having a demise then trying to pick up for it? I mean, why would I want to go back to an organisation like that? It doesn’t make any sense.”
We agree — it doesn’t make any sense.
On Monday, Business Insider tried ringing back the old “G Chahal” number that had called Shontell but it went to a Verizon voicemail that stated, “The number has been changed, disconnected, or is no longer in service.” That serves to support Chahal’s claim that he didn’t ring Shontell last week on that number.
RadiumOne CEO Bill Lonergan squashes the accusations
On Friday, RadiumOne’s chief executive, Bill Lonergan, sent out this memo to staff, denying that the company was in a dire financial state.
Some of you received an inquiry from a reporter about the state of RadiumOne and its current fundraising effort. The reporter is seeking to confirm claims in an anonymous email he has received that the company is in financial trouble. I want to COMPLETELY reassure you that the claims in the email are TOTALLY false. Here are the facts:
RadiumOne has retained an investment bank to assist with fundraising that would support the company’s growth strategy and we are still in that process. We are absolutely confident we will successfully raise the investment funds as planned;
The company is not in any financial distress. In fact we’re on track for a strong Q1 with major brands committing more to RadiumOne than ever in our history; and
Jobs are not at risk.
I have just landed in SFO and I am happy to talk individually with anyone who has further questions but I encourage all of you to disregard this mean-spirited attempt to undermine RadiumOne and our continued success. PLEASE do not allow yourself to be distracted by this nonsense. Thanks, Bill.
The memo confirms the claims we had received, that, yes, RadiumOne is on a fundraising mission. But no, it is not in financial trouble, and jobs will not be affected. That’s a pretty strong statement, and written words that would surely come back to haunt Lonergan if the company was indeed struggling to raise investment and had just a couple of month’s cash runway left.
RadiumOne board members resign
On Monday, Chahal tweeted what appeared to be emails from board members Vishal Gurbuxani and Krishna Subramanian to RadiumOne’s Lonergan and the board, announcing their resignations.
If you click to zoom in on the image, you can see Subramanian and Gurbuxani apparently announcing they were leaving the board effective immediately. We have confirmed that this is the case.
Gurbuxani is an ad-tech-industry veteran who now serves as an investor and adviser to several startups. He cofounded Mobclix, a mobile advertising exchange, which was acquired by Velti in October 2010. He went on to become Velti’s chief technology officer, before leaving to cofound his own company, Team in Residence, a group of entrepreneurs and venture capitalists.
Subramanian cofounded Mobclix with Gurbuxani and also followed him to Velti, becoming its SVP of advertising and marketing, and later its chief marketing officer. Subramanian is also a cofounder at Team in Residence. Before that, he cofounded the BlueLithium advertising with Chahal in 2004, which was sold to Yahoo for $US300 million in 2007.
Who to believe?
We still have requests for comment out to RadiumOne, board members, and other people close to the company.
It’s difficult to know precisely what is going on until those people open up and talk on the record.
Of the sources we spoke to outside of the company, the idea that RadiumOne was struggling to raise financing and might be in trouble didn’t surprise them — but none could confirm that was the case. It last raised investment — a $US21 million in Series B financing, according to CrunchBase — way back in 2011. (It has previously been valued at $US500 million.) And one only needs to look at the recent poor financial performances of rival ad networks like Rocket Fuel or Millennial Media to see that this a challenging sector to be in, particularly as companies like Google and Facebook steadily build out their ad-tech stacks.
A person close to the company told us that while ad-tech fundraising is difficult right now, RadiumOne is actually “doing well” revenue-wise, and that it could be cash-flow positive depending on what it decides to invest in next. Meanwhile, two sources close to the company told us people within RadiumOne believe that Chahal was behind the rumours leaked to the press. One source told us that the two board members were stepping down because they were tired of Chahal’s drama.
Chahal told us he thinks the leaks probably came from someone within the finance team at RadiumOne.
One thing is clear: This whole Chahal-RadiumOne situation is still one hot mess.
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