Unlockd’s administrators are weighing whether and how to continue the failed company’s legal fight with Google and have won a reprieve from a second meeting of creditors while they consider the options, which include third-party litigation funding.
The administrators, who were appointed on June 12, told the Melbourne Commercial Court they were in the process of considering how best to preserve or realise value for creditors of the digital adtech start-up, including a sale of the business, an asset and intellectual property sell-off, and whether or not to push on with the competition cases it initiated in Australia and the UK against Google.
Third-party litigation funding is on the table if the administrators decide to proceed with the court actions, according to the order granting the second-meeting postponement. A spokesperson for Unlockd told Lawyerly Monday the company was pursuing the path of litigation funding and had “several options at present”.
Despite winning court injunctions against Google, Unlockd blames the search engine giant’s threats to block the startup from its AdMob and Play store for its decision to enter voluntary administration. Unlockd claims in its suits that Google is misusing its dominant market power to thwart a disruptive competitor in the digital advertising space.
The company’s administrators, from McGrathNicol, told the court they had initiated a sales process, which they aim to complete by September, when the Australian and UK trials in the Google actions are scheduled to begin.
Financial planner Adara Partners has been recruited to conduct the process, which, they say, may involve either a sale of one of Unlockd’s corporate entities or a sale of business assets and intellectual property.
Justice Melanie Sloss on Friday granted the administrator’s application to extend the convening period for a second meeting of creditors from July 10 to October 10. The first meeting of creditors was held on Friday.
The administrators said they needed the extra time to complete the sales process and to assess the company’s options regarding the litigation, specifically whether to “implement a value preservation or realisation strategy in respect of that litigation”.
They also need time to “explore the possibility of obtaining further third party funding to improve the trading, sale and re-capitalisation options”. Third-party litigation funding was also being considered, according to the court order.
The “inherent complexity of the business” was the principal reason for the requested extension, Judge Sloss was told.
“As a practical matter, any prospective new owner would likely have to spend time understanding how it could use and exploit the Unlockd technology without a dependence on the Google platform,” the judge said.
“I am satisfied that the extension sought would allow the administrators the time they need to properly investigate the Unlockd Group’s affairs, sensibly deal with its extant litigation with Google and exploit so far as is possible the potential to re-capitalise or sell the business.”
The South Melbourne-headquartered company, which launched in 2016, has now terminated 14 of its 34 employees and consultants, and re-engaged three of those as consultants, according to the order.
The company said its business model, which pushes targeted advertising to users when their phones are unlocked in exchange for loyalty points, was a threat to Google’s advertising dominance.
“We believe that Google’s conduct and the effect of its actions represents a further example by them of anti-competitive conduct toward innovative start-ups such as Unlockd, that might pose a future threat to their position in the market,” it said.
In response to Unlockd’s litigation and its decision to enter administration, Google said the company was given an opportunity to comply with its Google Play and AdMob policies but failed to.
The administrators are represented by Herbert Smith Freehills.
The case is In the matter of Unlockd Ltd & Ors in the Melbourne Commercial Court.
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