(Bloomberg) -- One of Grover’s main creditors warned it could withdraw emergency funding as soon as next week, sending the troubled German startup into default, if shareholders obstruct its restructuring plan.
Fasanara Capital said it could terminate an agreement to provide liquidity if shareholders back a plan to sell the company back to its founder, according to a Dec. 16 letter from a law firm representing the lender that was seen by Bloomberg.
Fasanara and the current management support a recapitalization plan that will wipe out equity investors, while founder Michael Cassau and some other shareholders advocate for an alternative that would preserve some value for them.
“We would consider any action aimed at sabotaging or frustrating the company’s ongoing restructuring efforts to be tortious interference,” Kirkland & Ellis International LLC lawyers Cristina Weidner and Christian Halasz wrote in the letter. “Our client is prepared to pursue any legal actions to claim damages and recover their losses from any shareholder or director who participates in such actions.”
The investor fight pits Cassau against the company’s management and Fasanara over control of the startup that was valued at over $1 billion in 2022. Grover doesn’t generate enough revenue to cover its liabilities and its enterprise value covers less than half of the outstanding debt, according to the letter.
Some shareholders opposed to the Fasanara-backed restructuring allege it’s an attempt to take over the company on the cheap and want a special auditor to review management’s actions, according to three people familiar with the matter who asked not to be identified because the information is not public. They said the investors will push for a vote on the audit at an upcoming shareholder meeting.
“Grover is heading for a comprehensive financial reorganization,” the startup said. “The company and its advisers have intensively and comprehensively analyzed the economic situation and are in ongoing, constructive talks with lenders and shareholders.”
All shareholders will have an opportunity to invest in the business, according to the statement. Cassau and a spokesperson for Fasanara declined to comment.
Higher interest rates and increasingly scarce venture capital funding have led to a number of boardroom clashes at European startups this year. A feud at insurance tech firm Wefox Holding AG led to the ouster of its interim chief executive backed by its biggest investor, Mubadala Investment Co. Separately, Mubadala took full control of Getir Perakende Lojistik AS after a power struggle at the Turkish grocery delivery service.
Grover, which offers rentals of electronics like smartphones and tablets, has an annual revenue run rate of roughly €200 million ($208 million) to €220 million, two of the people said.
Grover has in the past raised financing by securitizing its inventory, using the gadgets it rents out as collateral against the company’s debts.
This summer, management and some investors including Cassau clashed over the value of Grover’s asset base due to a disagreement on future revenue estimates and the residual value of devices after their leases end, according to the three people.
Grover’s management significantly wrote down the value of its asset base, they said.
The startup’s financial position was further eroded by spending more than €7.5 million since October on advisers including McKinsey, AlixPartners and US investment bank Houlihan Lokey Inc., according to the people.
Houlihan Lokey, AlixPartners and McKinsey declined to comment.
Cassau, who created Grover in 2015 and left his post as chief executive officer last year after investors lost confidence in his leadership, is seeking to build up a majority position in the company by offering investors a deferred payment for their stakes, Bloomberg News reported last week.
An investor meeting on Tuesday to vote on Cassau’s plan failed to achieve quorum after some board representatives and key shareholders didn’t show up, the people said.
Management is planning to file for a pre-insolvency proceeding in Germany that allows for a company to restructure while keeping management in charge, according to Grover.
--With assistance from Libby Cherry.
©2024 Bloomberg L.P.