Vology, a Clearwater-based managed services provider, was insolvent when it was acquired by a private equity group last fall.
The company’s dire financial issues are spelled out in a Pinellas County court filing, in which Vology asks the court to determine the value of stock held by seven former shareholders.
Vology, which filed the petition in late April, said it would pay less than a penny a share, or $0.0026 for each share. Each of the former shareholders have rejected that offer and has claimed the fair value of their stock ranges from 22 cents a share to $6 a share.
Only one of the former shareholders, Beth Coleman, could be reached for comment. Coleman, an attorney in St. Petersburg, declined to comment but said she expected to respond to Vology’s allegations in her own court filing soon.
Vology — founded in 2001 under the name Network Liquidators and rebranded in 2010 — is among the largest and best-known managed service providers in the United States. The company had $175 million in revenue in 2016. Barry Shevlin, the founder, recently stepped down as CEO and now is senior managing director at Skyway Capital Markets, an investment banking firm in Tampa. Shevlin agreed to continue as an advisor to the new CEO, Tom York, and the executive team for the next year.
Vology was acquired last fall in a recapitalization led by Capitala Group, an investment firm based in Charlotte, North Carolina. The deal was described as “transformative” in a Dec. 5 news release.
The court petition used starker language for the deal, which closed on Nov. 25.
“At the time it consummated the Merger Agreement, the Petitioner [Vology] was insolvent, in that its liabilities exceeded its assets by well over $5.5 million. Indeed, as part of the Merger, the Petitioner’s senior secured lender sold its loan with a principal balance of over $17 million for $5 million. Without the Merger, the Petitioner would have exhausted its working capital and would have been forced to cease operations, restructure, or liquidate in some manner,” the court petition said. It did not say why Vology was in such a tough financial position.
The deal with Capitala was approved by most of Vology’s shareholders, but none of the seven shareholders named in the petition signed a written consent to approve the deal. Combined, they held 6.2 percent of the shares of Vology’s common stock.
“Under any theory of valuation, the shares of Common Stock as of the date of the Merger Agreement and immediately prior to the effective time of the Merger were worthless,” the petition said.
Vology wanted to provide at least some return to the former stockholders, the petition said, so the merger agreement cancelled their shares and converted them into the right to receive $0.0026 a share. Each of the former shareholders rejected the offer and said their shares were worth more than what was offered.
The petition lists each former shareholder, their holdings and what they said their stock was worth.
• John K. O’Shea and Beth M. Coleman, who together had 254,200 shares, said their stock was worth 86.3 cents a share.
• O’Shea, who separately held 60,000 shares, said those shares also were worth 86.3 cents each.
• Jason Scott Simmons, with 120,995 shares, said they were worth 22 cents a share.
• Dustin Kripas said his 8,000 shares were worth 50 cents a share.
• Ronald Collis II, with 78,276 shares, said his shares were worth $6 a share.
• Richard McKay, who held 73,000 shares, said they were worth $2.50 a share.
• Avni Dauti, with 6,507 shares, said they were worth $2.50 a share.
Each of the claims remains unsettled and Vology is asking the court to determine the fair value. Vology is also asking that the former shareholders pay for a court-appointed appraiser and for legal fees.
Vology has asked for a hearing in August in the case.