Rumour: OnLive may be in trouble as well, Layoffs expected

[Wesley]

OnLive is one of the few game streaming companies that can be labeled as competitors to Gakai, the service which Sony bought out recently. OnLive is based in the US and delivers streaming services for all the latest games from just about every publisher you can think of and delivers that content through your web browser.

Recently an e-mail leaked that hinted the company might be shutting down and laying off its staff. It was picked up by game developer Brian Fargo and he put it on his twitter account. As usual, one tweet was enough to set the entire internet ablaze and wetting itself with rumours that the company was indeed closing its doors. Interestingly, the e-mail also suggested that the company would shut down almost overnight, very similar to Kingdoms of Amalur developers 38 Studios, who dissolved in almost a week.

Linky

[Demikid]

http://www.escapistmagazine.com/news...to-New-Company

A quote from the onlive providers in response to the rumours is as follows:
"We can now confirm that the assets of OnLive, Inc. have been acquired into a newly-formed company and is backed by substantial funding, and which will continue to operate the OnLive Game and Desktop services, as well as support all of OnLive's apps and devices, as well as game, productivity and enterprise partnerships. The new company is hiring a large percentage of OnLive, Inc.'s staff across all departments and plans to continue to hire substantially more people, including additional OnLive employees. All previously announced products and services, including those in the works, will continue and there is no expected interruption of any OnLive services.

While we're not commenting on additional details, the reports have been way overstated, perhaps because we were unable to respond to initial enquiries until the transaction completed. The management team is intact, the company has substantial funding and we have all our current businesses to run."

[Wesley]

I've updated the article now, the transfer of assets poses a few questions I'm sure the public will be asking, especially as to how on earth this is legal.

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.