It took two bitter lawsuits and the airing of a lot of dirty laundry, but LG Ads is finally on track to go public by the end of Q2. And when it does, Ashish Chordia knows just what’s he’s gonna wear.
A branded Alphonso t-shirt, which he’s been saving for over a decade for that very purpose. It’s the only one he has left from the smart TV data company he co-founded in 2013.
But it’s been a journey to get here.
In 2021, Chordia and his co-founders sold a controlling interest in Alphonso to South Korean TV manufacturer LG Electronics (LGE), with plans to IPO within five years.
At the time, LGE agreed.
But then it changed its mind and the relationship between LGE’s leadership and Alphonso’s minority stakeholders soured, devolving into three years of boardroom drama and legal wrangling.
Chordia successfully sued LG Electronics twice over breach of contract and board misconduct, winning most recently on March 10 in Delaware Supreme Court, clearing the way for LG Ads to IPO.
Time to break out that t-shirt.
But what the heck happened here?
Below board
When LGE acquired Alphonso, it took a slight 50.1% majority stake in the company, which was rebranded to LG Ads and became LGE’s ad tech and TV data analytics division.
As part of the deal, LGE had agreed to make scheduled tender offers at fair market value to Alphonso’s minority stakeholders and also promised that Alphonso would have the opportunity to take itself public within five years of the acquisition closing.
But as LG Ads began to generate more revenue than expected – $270 million by late 2022 at a more than $1 billion valuation – LGE had second thoughts.
It reneged on the agreed-upon shareholders agreement and used its .1% majority stake in Alphonso to orchestrate a boardroom coup in late 2022 that involved firing Chordia from the LG Ads board, along with former Alphonso CEO Raghu Kodige and Lampros Kalampoukas, former CTO and VP of engineering.
And so they hired law firm Davis Polk to sue LGE in April 2023 in Delaware Chancery Court for wrongful termination and breach of contract – and they won. Chordia and Kalampoukas were both reinstated to the LG Ads board, and Paul Falzone, a venture capitalist and early investor in the company, was also allowed to join.
(Click here for lots of juicy details from the first set of court filings, including this excellent tidbit: LGE’s internal code name for its plan to take full control of the LG Ads board in 2022 by booting all Alphonso-friendly members was called “Project Wall-E,” which is a reference to the Pixar animated film about a trash-compacting robot.)
LGE appealed the chancery court’s ruling, so Chordia and crew sued again, this time in Delaware Supreme Court, which, in early March, also found in Alphonso’s favor and sided with the previous court’s decision.
By upholding the original stockholders agreement, the court’s ruling secures the rights of Alphonso’s minority shareholders and allows Chordia and his fellow Alphonso co-founders to pursue an LG Ads IPO.
“We negotiated our IPO rights, which are enshrined in the shareholder agreement, which is protected by the court,” Chordia said. “We now have the opportunity to build a billion-dollar business here.”
Taking stock
Which brings Alphonso full circle.
Board shenanigans aside, the plan had always been for the company to eventually go public, Chordia said, and now it’s in a position to do that.
Today, LGE owns roughly 60% of Alphonso/LG Ads and can run it like any of its other subsidiaries. It has four seats on the board, and the minority shareholders have three (Chordia, Kalampoukas and Falzone).
If LGE decides to change the way that the Alphonso product is sold in market, it can, and if it wants to change the management, it can do that, too. But the decision in Delaware Supreme Court places a bunch of negative restrictions on LGE.
For example, LGE is generally barred from doing anything to dilute the company’s value for minority shareholders, which means it can’t merge LG Ads with any other company or issue dividends or shares to itself.
And it can’t stop LG Ads from IPOing.
‘No regrets’
Considering all of the legal turmoil over the past few years, it’s hard to imagine the atmosphere in the LG Ads board room isn’t thick with tension.
But, according to Chordia, the board “actually works very collaboratively together, and everyone’s been thoughtful and kind, despite the legal overhang.”
“We’re all just trying to improve things for the company,” Chordia said, who also pointed out that, as the largest stakeholder in Alphonso, LGE has a lot invested in its success.
“Maybe we don’t have the most comfortable relationship, but LG isn’t slowing down usage of Alphonso across its devices,” he said. “They have a lot to lose if this company doesn’t do well.”
And personally, Chordia says, he doesn’t have any regrets, although the sailing could obviously have been smoother.
The initial thesis for selling a majority stake to LGE followed by an IPO “is still correct,” Chordia said. “One cannot regret running into unethical people doing illegal things – that’s not something any entrepreneur or anyone can factor into the deals they do.”
Still, Chordia has learned a few lessons during his more than three years in the legal jungle.
“They say whatever doesn’t kill you makes you stronger,” he said. “This taught me that, when faced with adversity, my co-founders and I do not give up – we’re crazy that way and keep on going, no matter what.”
And speaking of, the courtroom battles aren’t over quite yet.
A group of minority shareholder plaintiffs, including Chordia, have pending cases against multiple LGE executives who were involved in the board-related malfeasance back in 2022, including Chris Jo, the head of LGE’s platform business; Ronald Wasinger, LGE’s general counsel in the US; Matthew Durgin, North American VP for content and services; and Edward Lee, a former senior director of LG’s webOS ad platform.
Chordia told AdExchanger that he plans to proceed with these cases as soon as the court process allows.
AdExchanger reached out to LG Ads, but did not receive comment in time for publication.
