Either way, the lesson for Spot Runner investors is: be very, very careful when dealing with this company. (That lesson is underlined by a separate suit in which another founder won a $2.2 million ruling that he was cheated out of stock by Spot Runner.)
- The motion in the WPP case is summarized by PaidContent here. You can download a copy for yourself here.
But look at the tick-tock of events as described by Spot Runner. If you read closely, you'll see that Spot Runner's case relies on the argument that "we didn't tell you the founders were selling because you didn't specifically ask us whether the founders were selling."
April 2007: Spot Runner sends WPP a letter offering stock in the company.You can see the confusion: WPP is trying to figure out who is selling existing shares and Spot Runner replies, "the shares we're selling you are newly issued shares by the company, not existing shares."
May 10, 2007: Spot Runner sends another letter to WPP informing the company that a different investor wants to buy more Sport Runner stock, and that Spot Runner is offering to help find existing stock holders who may want to sell to the investor.
May 21, 2007: WPP writes to Spot Runner asking questions about buying Spot Runner stock: "is there an existing investor and/or founder selling existing shares related to this offering? If so, who is selling shares and how many shares are they selling?"
Spot Runner responds: "[t]his offering does not involve the sale of any existing shares. It is an entirely new issuance by the Company."
May 24, 2007: WPP buys $1.7 million in Spot Runner stock.
June 2007: Various existing stock holders including the founders close their stock sales to the other investor.
April 9, 2009: WPP figures out that it was buying new stock from Spot Runner at the same time the founders were selling their old stock, is furious and sues.