The Rumors of our death are only slightly exaggerated.

[Note: If you've come here because of the Forbes story, please read this clarification and correction to statements made in that article. 17-Aug]

Rumors have been flying lately about the demise of PubSub.com. While I've seen quite a bit of exaggeration in various forums, I can't deny that things are not going well for us. Our days are numbered. A recent attempt to execute a merger has been blocked and we've been blocked from raising equity financing that would allow us to continue to pay salaries and pay off our $3 million in debt. Thus, our "doors" will close soon if we can't find someone to pull us out of the current situation. Persons with fast access to cash and a desire for some of the industry's best technology are advised to contact us rapidly...

I believe firmly that the cause of our difficulties is not the team we have built nor is it the technology we've developed. Both are great. What has prevented us moving forward is a battle with a group of minority shareholders, some of whom claim to be lead by our ex-CEO Salim Ismail and are, in any case, primarily his "friends and family." This group is using very unusual clauses in our Shareholder's agreements to block mergers or financings. We've found it difficult to determine their motives, however, some have said that they believe that it is in their interest to drive the company into bankruptcy so that they can buy our software and start a new company. Of course, I believe that by the time we go through bankruptcy proceedings, we won't have any employees and frankly, a software company without the employees that developed its software is worthless. Our assets will have a much higher value if we have the employees available, thus, the best course at this time is to sell our assets, trademarks, etc. to cover the outstanding debt and make our employees available to the purchaser.

The clause that is being used to block us is a "one-man-one-vote" clause that requires that a majority of the shareholders approve any change to the shareholders' agreement. Mergers and financings require such changes. Asset sales do not. What that means is that one of our shareholders who has 75 shares has as much voting power as I do with my 540,000 shares (38.8% of the company). So, a tiny minority is able to block us moving forward on any of the normal paths for raising money. If no alternatives arise, we'll be in bankruptcy and we'll lose the employees within days.

I'm proud of what we've accomplished at PubSub.com and I'm very happy to have been able to work with a great team in an exciting industry. I'm terribly sorry that we've spent so much time on this internal political issues and haven't devoted more time to pursuing our product plans and building a better product for our users. Hopefully, in the next few hours and days, we'll find someone who is willing to help us out of this situation.

bob wyman
(bobwyman .at. pubsub .dot. com)

Comments

[Brian Hampson]

Regarding your one man one vote policy. Give a couple hundred people that you know will vote along your lines 1 share each. 200 new votes along your lines :) It would suck to see PubSub go. It's great service.

[Tris Hussey]

Bob, I'm sorry to hear this news. I've been an avid PubSub fan for a long time. I hope something comes out of the blue to plug you from the brink. Maybe Microsoft? They need to solidify their blog search, push beyond when they are already doing.

[Not Public]

This news sucks.

I am NOT a lawyer. However....

I was told that an asset sale requires a super majority of shareholders. So, that's not a route you want to take. Additional funding or an acquisition is more suitable.

Also, I believe that the Board of Directors can call a meeting and if the shareholders are not happy with the offer, the Board can give the shareholders appraisal rights. It's not a fun process, but a minority of shareholders can not block it, even if there is an "all Board members must ratify" clause.

If you'd like to talk to lawyers that can advise you on this, let me know.

[Bill Burnham]

Having been my fair share of shareholder battles you have my sympathy.

My non-lawyerly advice is that since you are clearly in the zone of insolvency you should just consumate an asset sale to your merger partner. No shareholder approval required for that. Of course that doesn't work so well for your 38.8% but any smart acquiror is going to realize that they will have to make it worth your while to stick around.

It's situations like this that make reiterate the beauty of drag-along provisions; never issue stock without them. Good luck!

[William Cross]

I have to agree with brian on this. Sell 100 shares to friends and allow them to back your vote.

[Kevin Burton]

Yes.... I agree. Can't you just sell some shares to friends and family and then have them vote in kind?

IANAL though and this area is always very complicated :)

In my experience the legal requirements always complicate issues and they're the MOST important thing to consider whhen you close a deal or take financing. This stuff always comes back to haunt you.

Kevin

[Anonymous]

Bob, how do you respond to the rumor that you called VCs and told them the company was unfundable?

[Patrick May]

Now I see why you have been so busy, best of luck resolving this difficult situation.

[Peter Q]

Bob, yeah - this sucks - I have emailed you two potential candidates that may be interested in or capable of helping here... There is a third one that comes to mind, I will drop him a note, shortly. and see if he can help as well...

Q

[Jon]

Good job sinking a good product. You and Ismail.

[Bix]

Gee... as you make no mention of those rascally minority shareholders having anything to be so wound up about, it must be down to sheer ignorance... or insanity! A very sad tale.

[Gomer]

Sorry to hear about the poor circumstances you are facing.

I applaud your openess and honesty in talking about this situation.

Were you aware of the one-shareholder/one vote policy when it was instituted? I am curious if this was something that was 'snuck' in or if you were aware of it and just did not give it much thought at the outset.

[Julie]

Does this remind anyone else of the last writings of the Dwarves at Barad-Dur before they were defeated by the orcs?

[Anonymous]

Salim is trying to protect his investment but Bob is going for the quick sale. Bob's string of lifelong failures to monetize his brilliance tells us a lot about his personality and pyschological makeup. Salim's history of success, on the other hand, tells us a lot about him. Who do you want to believe? The guy who failed to make money from his involvemnt in Lotus Notes and other ground-breaking areas of software and web development; or Salim, who serially picks out good ideas and makes them a success. It is clear to me that PubSub is a brilliant technology, but that the reason it has failed is not because of Salim but because Bob is simply too hard to work with. The histories of both men tell us a lot.

[Jon]

“the reason it has failed is not because of Salim but because Bob is simply too hard to work with.”

Its both. If theres one thing they worked together on, it’s destroying pubsub. Both of them are idiots in my book.

[ron angel]

Why not diversify put money into my film script
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--------------
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http://www.ssrichardmontgomery.com
(copy and paste into your browser)

[Vishal]

Bob,
I'm a firm believer of the fact that where there is a will, there is a way.... I believe every problem has its hidden solution, you only have to find it. Bob, I have some questions for you, I'm an upcoming netrepreneur working true ALONE and coming up with some classic web2.0 ventures of my own... not funded by any VC or external source.... All funded by myself while I've worked through internet offering my internet marketing and customer acquistion strategies and support to my worldwide clients... Bob, I think it's varied human psychologies that are clashing over here to create all this chaos.... As I said, I have a few questions for you, do get back to me at my email address and I shoot those questions to you privately... I don't believe in making a show publically and creating more noice... So just get back to me and may be this helps!

Shit... your blog exposes email addresses along with contact names... Bob, that's enough for spambots to blast our mailboxes.... Bob, now publicize YOUR email address and I DO get back to you!

[Al Snyder]

Let's see. You have 540,000 shares. Give away 40,000 shares (or sell them through a broker for a penny each) -- one for each individual who gives you a proxy. Then take your votes and go save the company.

[empty spaces]

so why don't sell some of your stock for a nickle to your friends and family and have them vote in your favor?

[John Cage]

You know what, I think publicly airing your issues in such a way says more about you than what you actually said. I think PubSub is a great idea, and not a bad implementation, however I don't think there is any excuse here for letting it get to this position. If the issue *really* is the one share one vote, then you really should have been aware of that and what it represented from the beginning. Good luck to Salim Ismail is what I have to say after you forced him out of the company

[Karel Frielink]

Bob:

I'm no expert as far as your law system is concerned, but in my country even minority shareholders must observe the principle of reasonableness and fairness.

May be the minority shareholders can be held liable in tort based on a violation of the (unwritten?) rules pertaining to proper societal conduct.

In my opinion, liability may arise when (minority) shareholders take insufficient account of the interests of e.g. the creditors of the company, which seems to be the case here.

Also, the exercise of powers granted to a shareholder (e.g. when a particular majority is required for certain decisions) can be abused and thus the abusers can be held liable. You better consult an attorney to see how things work in your country.

All the best.

[Susan Mernit]

Bob, I find these comments shocking. Would anyone ever want to give money ever again to someone who publically reviled their co-founder and business partner as you do here?
I doubt it.
Whatever issues or bitterness you have, this public smearing of someone who's just gone offline for two weeks speaks more about your sense of fairness and ethics than about anyone else's. I have known both you and Salim for some years and not only don't I believe he is taking any actions to be petty or spiteful, I wonder about your sense of entitlement in making such claims.
Given the very public tantrum you've posted here, I would suspect anyone who wanted your IP would want an iron-clad guarantee that you were safely out of the picture as assurance this kind of public smearing would not happen to them.

[brad]

Sounds like quite a plight. Might think twice next time you are presented with an opportunity to do business with someone named "Salim Ismail"...

[Bob Wyman]

Thanks to all who have provided your support. Please understand that we've now seen that this blog posting has done the job it was intended to do. We've managed to get quite a number of private communications from folk who are able to offer material assistance to us. Most importantly, given that we have very little time and can't really spend time talking to folk who don't have the stomach for the kind of issues we have, the people who have contacted us were aware in advance that there was "messiness" to be dealt with. We've also heard from many people who we never would have thought to contact on our own.

I recognize, as some have pointed out, that raising this issue in public will undoubtedly cause some cloud over my name for the rest of my career. No matter how "right" I may be in all this, mere association with this kind of unpleasantness is a negative that I'll be working against for years. If nothing else, raising this issue in public makes clear to all the profound mistakes I made when selecting my partners to create this business that I've spent 20 years preparing for. However, as a member of the board, I have a fiduciary duty to employees, creditors and shareholders to do everything I can to pay off debts, preserve payroll, and maximize shareholder value. Sending this public and very embarrassing call for help will certainly cost me a great deal personally, however, I strongly believe that it is an important part of upholding my fiduciary duty as a member of the board of PubSub to do all I can to solicit assitance from wherever it might come. Also, please understand that as PubSub's largest shareholder, I am acutely aware of the impact of anything that will tend to decrease the value of our equity.

For those who suggested that we simply issue shares to create more shareholders -- Sorry, but its not quite that easy. We've been assured by counsel that such a move would not be looked on kindly by the courts and would be simply invalidated. That kind of tactic will get us nowhere.

"Thanks" to all who have already provided support and assistance and "Thanks" to those who may do so in the future. To those who haven't contacted us yet but see some value in exploiting our situation or otherwise helping us, please don't hesitate to contact us. We've got great technology, a fabulous team, and we're eager to get back to the work of building great and profitable products and services.

bob wyman

[Xofis]

Sell 100 shares to friends and allow them to back your vote.

Stuffing the ballot box is stock fraud.

Might think twice next time you are presented with an opportunity to do business with someone named "Salim Ismail"...

Thanks for the insight, "Racist Brad."