WPP has filed a suit against Spot Runner, the self-service ad creator in which it has a stake, as well as the company’s CEO, Nick Grouf, and its board for securities fraud and breach of contract, reports AdAge. Spot Runner brings self-service web advertising techniques to TV spots.
Spot Runner’s alleged contract breach with WPP says that Spot Runner failed to disclose stock sales to other shareholders, Spot Runner touted the holding company’s investment in it to gain new investors, only to turn around and sell the stock in violation of federal and state securities law.
The suit names Grouf and David Waxman, co-founder and CTO; Peter Huie, general counsel; and board members Danny Rimer and Roger Lee. It also names the two venture capital firms that helped Spot Runner get off the ground and are now majority shareholders: Battery Ventures and Index Ventures.
WPP is seeking at least $13 million plus attorneys’ fees. Spot Runner plans to fight the claims, reports AdAge.
“The defendants operated the company from its inception for their own benefit instead of the best interests of the company and its stockholders,” WPP said in court documents. “Rather than working to make Spot Runner a successful and profitable venture, they perpetuated a ‘pump-and-dump’ scheme in which they aggressively promoted the company to new investors (often by promoting that WPP was an investor in and supporter of the company) and then sold new investors large quantities of their own secondary shares at ever-increasing valuations.”
“This lawsuit is about WPP, a minority shareholder, wanting to sell their Spot Runner stock retroactively,” the company said in an e-mailed statement. “…We believe the claims are without merit and we will vigorously defend against them, including taking all necessary legal action to protect Spot Runner’s reputation.”