PhonePe on Saturday said it has filed a formal complaint with market regulator SEBI against Ventureast, alleging that the latter’s “side dealings” with Affle are a “deliberate bad-faith attempt” to scuttle PhonePe’s majority acquisition in OSLabs.
Walmart-owned digital payments platform PhonePe was in advanced stages of discussions to acquire a majority stake in Indus OS, a homegrown content and app discovery platform, in an all-cash deal worth USD 60 million.
It currently holds about 32 per cent share in OSLabs, having bought a stake from a few investors, including Omidyar Network, JSW Ventures, Micromax and 19 other angel investors.
However, mobile advertising company Affle Global – a minority stakeholder in Indus OS – has filed an arbitration case against OSLabs in a Singapore court claiming they have the right of first refusal (ROFR) on sale of founder’s shares. PhonePe has also filed a case against Affle and Ventureast (another IndusOS investor) in a Singapore court.
PhonePe, in its statement on Saturday, said its complaint to SEBI against Ventureast “relates to multiple violations of SEBI’s code of conduct in relation to Ventureast Proactive Fund-II (VPF)’s recent side dealings with Affle which are a deliberate bad faith attempt to scuttle the OSLabs majority acquisition by PhonePe”. Ventureast declined to comment, while emails sent to IndusOS and Affle did not elicit a response.
PhonePe added that it has “highlighted serious misrepresentations, including a series of unethical and bad faith actions, as well as potentially illegal actions, that have been and are being continually undertaken by the Managing Partner, General Partner and Principal of VPF involved with this transaction” in its complaint to the market regulator.
The statement noted that PhonePe has already filed a lawsuit against Ventureast and Affle in Singapore. The lawsuit claims that VPF “deliberately deceived” PhonePe, by continuing to engage PhonePe and OSLabs on the sale of its shares in OSLabs in favour of PhonePe, even though it had sold those same shares to Affle in a side deal without OSLabs and PhonePe’s knowledge on a prior date during a legally binding no-shop period.
“While the legal matters will be settled in court, PhonePe has now approached SEBI to look into these gross ethical violations and dereliction of VPF’s fiduciary duties to protect the interests of OSLabs, its investee company,” PhonePe said. PhonePe CEO and founder Sameer Nigam said founders are always held to the highest standards of legal and ethical integrity by investors, but these standards should apply to investors as well.
“I believe in this case, VPF has not only broken SEBI’s code of conduct, but it has also acted in complete negligence of its fiduciary duties as a large shareholder of IndusOS. By deliberately derailing PhonePe’s acquisition of IndusOS, a deal which all three OSLabs founders continue to also believe is in their company’s best long-term interests, VPF has also hurt OSLabs’ long-term interests,” he said. Nigam expressed confidence that the company will prevail on both fronts, and added that “hopefully in the process also create a strong deterrent against bad actors trying to bully young startups”.