Updated: Shrapnel directors sue shareholder in battle over corporate control but game on track
Updated: Shrapnel’s official X account has tweeted that while it cannot comment on ongoing legal proceedings, “it remains fully in control of the development, funding and operations” of the game and early access is still expected in the coming weeks.
As reported by legal website Law360 – here, email-gated – six of the co-founding directors of US company Neon Machine, including erstwhile CEO Mark Long, have filed a lawsuit against controlling shareholder Cort Javarone.
Javarone is the founder and CEO of 4D Factory Inc, which acquired a controlling stake in Neon Machine when it spun out of HBO in 2020. Neon Machine is developing web3 PC extraction shooter Shrapnel, which is about to enter early access in December, with a full release planned in mid 2024.
The suit filed in Delaware’s Court of Chancery claims Javarone fired Mark Long as CEO on 13th November, taking the position himself and appointing two new directors to the board. Moreover he’s refusing to issue the preferential shares that are due to investors Griffin Gaming Partners and Polychain, which would result in him losing control in the company.
An $8 million investment from Griffin and Polychain was announced in November 2021 and is said to have given them the option to get preferred (non-voting) shares in Neon Machine following the issuing of the game’s SHRAP token, which occured in April 2023. The shares should have been issued before the end of July and have the option to be converted into common voting stock.
As for the underlying reason why this struggle for control is occurring, Law360 says that 4D Factory Inc entered Chapter 11 bankruptcy in October owing $4.5 million, and that Javarone is “raiding or attempting to raid Neon’s coffers”.
The lawsuit further suggests he and the two other defendants are “acting only to entrench themselves in a board majority, causing severe harm to Neon and exposing it to tens of millions of dollars in liability, restricting its ongoing business operations, and eliminating its ability to raise additional funds”.
More recently, Neon Machine announced a $20 million Series A round, which as well as Griffin and Polychain, also included capital from Brevan Howard, IOSG, Franklin Templeton and Tess Ventures.
Law360 reports the case as being Mark Long et al., v. Cort Javarone, et al., case number 2023-1186, in the Court of Chancery of the State of Delaware.