Spark Ventures PLC, formerly NewMediaSpark, is an early-stage venture capital investor, operating in Europe for the last 12 years. That makes it an old timer on this nascent scene. But today its third-largest shareholder urged fellow stakeholders to vote against a proposed management buyout. Venture Wire reports that Vine Street Capital, which has an 8% stake, believes the deal is undervalued and rewards a management team that has engaged in “consistently loss-making investment activity” for a decade. At this level, this is a fairly explosive statement and would suggest something of a breakdown in relations.
Spark’s independent non-executive directors have replied with a letter to shareholders which argues that it would be “extremely difficult” for a new broom to sweep the old management team away and for a new team to deliver value to shareholders. They called fro a vote in favor of the buyout.
Spark wants to transfer the management of its investments, third-party funds and all employees to a new company… owned and managed by the firm’s current executive directors.
Vine Street Capital says Spark should instead invite offers for its subsidiary Querist or inviting bids for the management of Spark Ventures’ assets, effectively winding down the operation. Spark’s directors disagree saying the proposals lack clarity, especially over whether existing executives would play a part going forward.
Spark has also proposed that it change direction to focus on realizing its current investments and returning 2 pence a share to shareholders, which Vine Street says it will in fact support.
So what are the implications for Spark’s investments to date? In June Spark said it would realise the rest of its investments by 2014 after a strategic review and would stop making any new investments.
It’s a pretty big deal when shareholders make public statements in this way and it doesn’t inspire confidence for the future.
Company Date Round Size Participants
OMGPOP 3/09 Series B $5M 3
Antenova 10/08 Unattributed $6.5M 5
Secerno 7/08 Series B $16M 3
we7 1/08 Series A $6M 3
Skinkers 10/07 Series B $16M 2
Skinkers 2/06 Seed $3.5M 1
Mind Candy Unattributed $10M 3
Update: Spark has contacted me with this clarification: “While SPARK Ventures plc will make no new investments, it will continue to invest follow-on funding in its existing portfolio. Furthermore, SPARK’s other funds, which include several VCTs and University funds, will continue to actively look for and invest in new opportunities.”