OnLive Explains Friday’s Cryptic Restructuring

Rumors swirled around OnLive after the company engaged in a series of bizarre actions on Friday. Hoping to quell some of the questions, the company sent us a statement late Sunday night to clarify things. The story is still wacky, but at least now it makes sense.

The company did indeed go through a sort of bankruptcy, called an “Assignment for the Benefit of Creditors.” As part of the proceedings, the company’s assets — technology, desk chairs, intellectual property and all — were sold off to a newly formed company that plans to continue operating and offering the service under the OnLive name. The transition was so seamless, in fact, that there will not be an interruption of service. The new company is backed by an affiliate of Lauder Partners, a firm that originally invested in OnLive back in 2009.

The ABC deal didn’t include a provision for staff, so the company’s employees were indeed laid off, but OnLive’s Jane Anderson told us that “almost half of OnLive’s staff were given employment offers by the new company at their current salaries immediately upon the transfer, and the non-hired staff will be given offers to do consulting in return for options in the new company. Upon closing additional funding, the company plans to hire more staff, both former OnLive employees as well as new employees.”

We’re not sure how many of those former employees will take up the new company’s offer for stock options in exchange for consulting, seeing as how none of the existing shares for OnLive were transferred in the ABC settlement either. The stock options paid to OnLive employees previously — including founder Steve Perlman’s shares — are basically worthless scraps of paper now. PCWorld reports that HTC has already announced that it will take a $40 million hit from its investment in OnLive.  

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