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Investors were cheated by Murdoch buyout, MySpace founder says

$580m sale price 'eye-popping theft'

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Brad Greenspan, founder of social networking giant MySpace, has claimed that the sale of the business to Rupert Murdoch's News Corporation last year for $580m was a scandal and has demanded an investigation into his allegations that it was sold too cheaply.

"[This is] one of the largest merger and acquisition scandals in US history," he said. He wants the deal to be investigated by the US financial regulator the Security and Exchange Commission, the Department of Justice and the Senate Committee on Finance.

Greenspan alleges that the management of the company, and chief executive Richard Rosenblatt in particular, hid vital financial information about MySpace parent Intermix Media's performance in order to convince the shareholders that $580m was a fair price for the business.

"News Corp's valuation has increased by $12bn since the transaction occurred just one year ago, and there are several independent analysts today that agree that MySpace is worth tens of billions of dollars," Greenspan said. "It is time everyone knew the truth about the 'hijacking' of MySpace and the individuals responsible for this eye-popping theft."

Greenspan says that executives believed at the time that the company could be worth $20bn but did not disclose this to shareholders.

Last February, Greenspan filed a complaint against Intermix and VantagePoint Venture Partners in the Superior Court of California County of Los Angeles. In that complaint he claims that News Corporation bought Intermix as a result of an unfair process and at an unfair price that did not reflect the value of the business. Another shareholder lawsuit has recently been filed in Federal Court in relation to the deal, said Greenspan's statement.

"It's unfortunate that Mr Greenspan continues to issue press releases complaining about a deal that many industry experts initially believed was a risk for News Corp to take," a News Corporation spokeswoman told Reuters news agency. "We've strategically built this business since the acquisition and are just now beginning to realise real financial value. This is simply a case of sour grapes making for loud complaints."

Greenspan said that he found internal company reports which said that MySpace revenue grew at a rate of 1,289 per cent a year between 2003 and 2005. The growth of the whole of the company, which included other units, was 52 per cent, which is the figure which most shareholders were given, says Greenspan.

Greenspan made $47m from the sale of the company, which he left in 2003 amid an informal SEC inquiry and restatements of accounts, according to Reuters.

Copyright © 2006, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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