Over Here, Winklevii! NetworkEffect Goes to Court.
Today the NetworkEffect staff of one is packing up the MacBook Air and heading to the U.S. Court of Appeals for the Ninth Circuit for a scheduled hearing of “The Facebook, Inc. v. ConnectU, Inc.” The latest action in the long-running case between former Harvard students Cameron and Tyler Winklevoss and their unofficial underclassman coder Mark Zuckerberg will be in a San Francisco courtroom, where the Winklevii are asking that a previous settlement be re-evaluated.
In hopes of seeing some tall curly haired Olympic rowers and their legal posse in the flesh, I’ll be there bright and early, though the action may not commence until later in the day. The crew from Facebook will also be making an appearance, though we don’t know exactly who will show up.
The twin Winklevoss brothers–who have said their portrayal in the Hollywood blockbuster based on the founding of Facebook, “The Social Network,” was accurate–had settled two years ago with Facebook for $20 million in cash and $45 million in Facebook shares (worth approximately $150 million now). But they think Facebook purposely withheld the real value of the shares at the time. A reassessment would make their stake worth much more: $608 million at the latest valuation.
For an explainer on the latest ConnectU appeal, see this recent NetworkEffect parsing of a filing from Facebook that effectively poked fun of the Winklevii:
The settlement came after closed-door professional mediation in February 2008. Facebook says it’s outraged that the Winklevii and their lawyers are bringing conversations from mediation back into the appeal, because all involved were sworn to confidentiality…
But after the settlement, ConnectU came back to the table asking for its share to be revalued. It had originally negotiated using a publicly reported valuation from when Microsoft invested in Facebook, rather than an internal valuation from around the same time that would have priced the shares much lower ($8.88 versus $35.90). A revaluation of the shares to a smaller amount would give the twins a larger stake in the company.
If anything interesting happens in court, I’ll be sure to write about it here.
Update: Here’s my report on the Winklevoss hearing.
Please see the disclosure about Facebook in my ethics statement.