Bebo Files Chapter 11 Bankruptcy Petition
Bebo used to be one of the largest social networks back in 2008. AOL acquired Bebo in March 2008 for $850 million in cash. AOL sold Bebo to Criterion Capital and several other investors in June 2010. Some of the minority shareholders in Bebo include co-founder Michael Birch, SV Angel, and Hecker Consultancy. Bebo has filed a voluntary petition for Chapter 11 Bankruptcy in the Central District of California, according to the Chapter 11 Cases blog.
About a year ago, Bebo’s founders and shareholders filed a lawsuit against Criterion Capital for mismanaging the website. The shareholders requested courts to appoint a receiver as a way to take control of the company after they judged Criterion was mismanaging Bebo.
The receiver that was appointed to the case after the motion in February was Burke Capital Corporation investing partner Michael Ong. It is unknown whether Bebo will be sold in whole or in multiple asset parts. He will first attempt to restructure the remaining business. The largest unsecured creditors in this case are “IRS ($380,000); Criterion Capital ($314,000 – disputed); AOL Advertising ($120,900 – subject to setoff, according to Bebo); Quality Technology Services ($120,000) and e-DBA Limited ($43,571),” according to the petition filing below.
Bebo CEO Adam Levin (also the Criterion Capital Partners MD) might be removed from his position as a result of the lawsuit. Criterion Capital acquired Bebo for only $10 million two years after AOL spent $850 million for the social network.
The minority shareholders filed a $5 million lawsuit against Criterion for “destroying” the website. They did not stop larger players like Facebook and LinkedIn from creating a wide gap in marketshare. Bebo also defaulted on a lease for their San Francisco offices so the company was moved down to L.A. without consulting the board. The lawsuit also claims Levin paid himself $14,000 per month as CEO and he was not working full-time at Bebo. Bebo did not hold any board meetings for at least 20 months and financial information about the performance of the company was not given to the board.
The motion also says that Levin did not pursue leads for the sale of Bebo to interested parties like Tagged and AdKnowledge. AdKnowledge was reportedly offering to pay $15 million plus a $15 million earn-out. Bebo’s official Twitter account since November 2012 and the company went offline several times.
Below is the Chapter 11 bankruptcy filing: