There are so many ways to play the puns here. Who Moved my Rain? Move before you get Rained Upon. It’s Rainin’ Moves. All pretty goofy.
In the interest of full disclosure, I’m biased but so is Greg Swann. Greg calls Active Rain stoopid technology, I call it useful, Again, my interest in Active Rain’s success is financial; I write to and market to the Realtor channel.
Move’s shuck and jive play for Active Rain is indefensible. If Move were a home buyer, they would be entitled to material information in the interest of full disclosure. Real estate agents call this the inspection or contingency period. In the corporate finance/M&A world, it is referred to as the due diligence period. Move had every right to reverse it’s offer to purchase Active Rain if it discovered something during the due diligence period.
Here’s where Move screwed up; they started a competing business while fleecing the boys of their member roster and competitive points system plan. That is referred to in the lawsuit as the “confidential information”. They placed contingencies upon the purchase: Active Rain was instructed to cease all merger and acquisition opportunities, revenue opportunities, and financing plans. Those very actions, combined with a simultaneous push to present a competing product, suggest that Move perceived Active Rain as a competitive threat. It used the carrot of its deep pockets as a tool to paralyze the industry leader while developing a competing product.
Are the boys at Active Rain insane to think that the platform is worth $33 million? I think so but I’m no investment banker (and I clearly have no experience in valuations of tech start-ups). The figure, however, was set by the perpetrator of this scheme. Move played the old Nigerian e-mail scam on Active Rain. Naivete doesn’t make the victim any less injured nor does it make the scam artist any less culpable. That means you can’t say “What are they stupid to think we’d pay them that much? ” as your defense.
A jury trial will be a nightmare for Move, especially if that jury is in California. Twelve reasonably hard-working men and women will listen to a complaint from three ambitious and bright young men. The defendants, clad in Bond Street suits, will scoff at the amount of the complaint and enjoy a cigar in the back room, chuckling over the fleecing. A jury of Californians will listen to a parade of Realtors and originators as witnesses, braving the falling market while embracing a new technology. Make no mistake about it, these Active Rain users are cultish in their loyalty to the Network. I know because I’m one of them.
…and Move will be seen as a red-handed thief. A red-handed thief who, when caught, tries to explain his innocence by claiming that the diamond he stole was really a piece of glass.
Active Rain gets $8 million. We’ll never know because the settlement will be sealed.
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