Kixeye shareholders sue Stillfront for $30M over earnout dispute

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Kixeye shareholders have sued Stillfront Group for more than $ 30 million in a disputed earnout payment in connection with the acquisition.

Fortis Advisors, a sales representative acting on behalf of Kixeye’s shareholders, filed a lawsuit today in Delaware’s Chancery Court. In it, Kixeye claims that Stillfront knowingly violated a $ 30 million merger agreement or a bonus to be paid if Kixeye hit certain milestones. The lawsuit provides a window into normally private negotiations between companies.

We have asked Stockholm, Sweden-based Stillfront for a comment. In June 2019, Stillfront acquired Kixeye for $ 90 million in a deal that had earnings of $ 30 million based on Kixeye’s expected financial results for 2019.

Kixeye made popular real-time strategy games for mobile devices and PCs. The titles included games like War Commander: Rogue Assault, Battle Pirates, War Commander and Vega Conflict.

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Fortis accused Stillfront of making some creative accounts that made Kixeye’s results look worse than they actually were in an allegedly vicious attempt to evade payment.

Under the original agreement, Stillfront did not acquire the entire Kixeye. Kixeye planned to suspend operations related to the unreleased game Kingdom Maker, which was still under development.

Earnings would be based on a non-GAAP financial performance measure called adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). Stillfront allegedly “adjusted” retroactively or deliberately manipulated its expenses before the merger, making it nearly impossible for Kixeye to reach its earnings target.

Stillfront reportedly dramatically reduced the cost of Kixeye’s games after the merger, even though it had previously described the games as stable and profitable. Prior to the acquisition, Kixeye had more than 70 million unique users.

In January 2020, Stillfront announced that it had laid off the Kingdom Maker team and eliminated about 20 jobs.

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