Alrov group sues David Rubner, Net2Wireless: demanding return of $5 mln investment
new.globes.co.il
Avishai Ovadya and Yitzhak Danon
04.12.2000 17:28
The Alrov group, controlled by Alfred Akirov, today filed in the Tel Aviv District Court a $21.7 million suit against David Rubner and Net2Wireless, which develops compression technology for the transmission of multi-media content on cellular networks. Alrov lost 90% of its investment in Net2Wireless.
Alrov claims that its $5 million investment in Net2Wireless last March was based on false representations by Net2Wireless chairman David Rubner. Alrov claims that Rubner concealed essential facts from it during the representation which claimed that the investment in the company was a one-time opportunity.
Unitl a year ago, Rubner served as ECI Telecom CEO and president. Net2Wireless was scheduled to merge with Sensar (SCII), a Wall Street-listed stock exchange shell company. But Nasdaq has not approved the merger, expressing concern about the merged company’s method of share listing, and about the fact that the shareholders had been previously involved in legal proceedings regarding their activities in the capital market.
The reference was apparently to the initiators of the Sensar-Net2Wireless merger, David Bodner and Murray Haberfeld, whose activities were exposed in a Barron's article some six months ago, according to which the two men have a dubious record in the US capital market. They acted as matchmakers between Net2Wireless founder Nehemia Davidson and the owners of the Sensar stock market shell, after themselves investing in Net2Wireless at attractive prices.
As a result, Sensar’s shares soared from $1 at the end of 1999 to $90 in March. However, the cancellation of an investment by Nextel and the merger problems caused Sensar stock to plummet. During this period, Net2Wireless held a $29 million private placement, the investors in which included Alrov, which is now filing suit.
Alrov’s suit claims that its March agreement with Net2Wireless should be annulled because the company and Rubner misled it. Alrov claims that in order to convince it to invest in the company, Rubner exploited his reputation as a leading force in Israeli high-tech, using false representations and concealing facts.
Alrov also charges that on March 22, it transferred $5 million to the company, in exchange for less than 1% of the equity at a price of $27 per share. It became clear in retrospect that several weeks prior to the Alrov investment, several share allocation deal had been made with various groups at less than $1 per share.
In addition, prior to the completion of Alrov’s investment Net2Wireless gave millions of options to various groups at a exercise price of only $1.86, including Rubner himself. He received 1,074,074 options in Net2Wireless at an exercise price reflecting a $20 million profit, taking into consideration Alrov’s investment in the company at $27 a share.
Published by Israel's Business Arena on 4 December 2000 |
