It seems that the rumours were true after all. OnLive underwent a restructuring phase and the company was sold to another newly-created company, along with all the assets, attached IP and user license subscriptions. All OnLive employees have been retrenched but some have been given positions within the new company, with the rest of the staff not hired being asked to do consulting for the new company. OnLive will still trade under its usual name and no changes in the service should be apparent to the consumer.
The interesting part of this deal is that the previous OnLive exectutives don't get a cent from this sale. In fact, any stock they previously owned is now worthless, since the assets applicable to OnLive were transferred to an assignee, who then sold it off to a newly-formed company that has yet to be named. Verbatim from OnLive's Q&A on the subject:
Q. Is there any cash or stock in the new company provided for any OnLive, Inc. shares?
A. Unfortunately not. The nature of the transaction is such that only assets, not shares, were purchased. This is true for all shares of OnLive, Inc., whether held by investors, employees or executives.
Q. Did Steve Perlman receive stock or compensation in this transaction?
A. Like all shareholders, neither Steve nor any of his companies received any stock in the new company or compensation in this transaction at all. Steve is receiving no compensation whatsoever and most execs are receiving reduced compensation to allow the company to hire as many employees as possible within the current budget.
That means that if you owned a million Dollars in stock, you just lost it and the company has kept all that money in the process of the changeover. In the US, legislation states that if a company closes doors, its liable to pay out any remaining compensations and bonuses to employees and stakeholders. OnLive worked around this by transferring only its assets to the third-party who then sold it off, a legal loophole open to companies who want to avoid filing for bankruptcy at all costs.
It also means that the company avoids the debt repayments to investors normally required when a company closes shop, because the ownership of assets has changed. Its a neat workaround for those who benefit, but it gives the shorter end of the stick to the employees who now have to look for permanent work elsewhere.