Pinju to Sue Shanda for Lack of Funding
Beijing Times, 1/10/12
Chinese e-commerce site Pinju.com announced in a public filing today that it would suspend its services after the funds promised by Shanda Interactive (Nasdaq: SNDA) failed to arrive, saying it will pursue the funds through legal action and will return merchants' deposits in the meantime.
Ge Binbin, the founder of Pinju.com and former CEO of online game developer and operator Shanda Games (Nasdaq: GAME) subsidiary Goldcool, was recently forced to sell his stake in Pinju owing to a shortage of funds, at which point Shanda - which Ge had publicly claimed was an investor in Pinju - issued a statement saying that it had never invested in the company. Ge responded by insisting that Shanda and others had planned to invest in Pinju, but had failed to follow through on their promises of funding, leaving the site with no option but to shut down. He conceded, however, that he had never signed any written agreement with Shanda. Ge lost more than RMB 20 mln of his own money in the failed company.
In a statement yesterday, Pinju.com said that its registered company Shanghai Yuwang Information had entered liquidation, and that the company was taking legal action to pursue the funds promised to it by investors in order to protect the interests of its shareholders and business partners. Ge Binbin said that he was preparing to take out loans allowing the company to return 50% of vendors' security deposits by the end of January 2012, and the remainder by the end of February.
Pinju.com will continue to operate for the time being in order to allow buyers and vendors to conclude any uncompleted transactions. The board of the company is actively seeking new investors and will seek to minimize damages to the company and its partners to the greatest extent possible.
Ge Binbin revealed that as a major investor in Pinju, Shanda had confirmed that it would partner with two other major investors to invest RMB 2 bln in Pinju, but that internal workflow issues and delays at Shanda meant that he had been left to put up the cash himself. Ge said that the RMB 2 bln figure had been approved by Shanda CEO Chen Tianqiao, and that he could publish their chat logs if necessary, adding that he had contacted a lawyer with the evidence.
Zhang Jin, Shanda Networks SVP and spokesperson, responded to the affair yesterday by saying that Shanda and Pinju had never signed any investment agreement, leaving Pinju no basis for legal action.
Editor's Note: Ge has already made logs of his chats with Chen public, according to Sohu IT. In the logs, Chen allegedly promises RMB 180 mln in funds, accounting for a 70% stake, while Ge pledges to provide RMB 20 mln, or 10%, while the remaining 20% of shares would go to the new company's employees. But Chen does not agree to provide the funds in a lump sum, instead requiring a valuation adjustment mechanism (VAM) and a staggered deposit schedule. Ge said the chat logs are genuine and are hosted on Shanda's internal office instant-messaging network servers. For more information on this topic, please see "Shanda Denies Investing in Group Buy Site Pinju," MD 1/08/12 and "Goldcool CEO's C2C Start-Up to Launch in October," MD 7/12/11 issues.
Keywords: B2C Goldcool Shanda Shanda Games Chen Tianqiao Ge Binbin e-commerce Internet funding SNDA Zhang Jin Pinju law litigation group buying
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