HipCricket, a Tatango competitor, recently filed for bankruptcy as the company has accumulated losses of $93.7 million dollars since 2012, making it impossible for the company to continue operations. On January 20, 2015, a New Jersey-based company called SITO Mobile Limited had agreed to purchase the remaining assets of Hipcricket for $4.5 million. Little did SITO Mobile Limited know that a company called ESW Capital LLC was going to outbid SITO Mobile Limited by $2.7 million at the last moment, making ESW Capital LLC the winner in the bid to purchase the assets of HipCricket from bankruptcy.
On March 10, 2015, the Bankruptcy Court for the District of Delaware approved the Amended Bid from ESW Capital LLC for the Right to Sponsor a Plan of Reorganization, which would take place after a Chapter 11 plan is confirmed. What does this mean? ESW Capital LLC will be purchasing equity in a reorganized HipCricket. Being that HipCricket has accumulated losses of $93.7 million dollars since 2012, the company is going to have to reduce spending significantly so that it’s able to survive on its own.
How does this affect HipCricket creditors? If Hipcricket had stuck with SITO Mobile Limited’s offer, unsecured creditors could only expect no more than 2% of the money they’re owed. With ESW Capital LLC’s offer, unsecured creditors could expect up to 21% of the money they’re owed, as long as certain other conditions are met.
To compensate SITO Mobile Limited, they’ll receive a breakup fee in the amount of $225,000 and expense reimbursement of up to $100,000. Jerry Hug, Chief Executive Officer of SITO Mobile said the following regarding how the deal fell apart.
“We were disappointed in the ruling by the Bankruptcy Court. We believe the fact that Hipcricket breached our stalking horse Asset Purchase Agreement by accepting the “Plan of Reorganization” bid by ESW. We believe that SITO should have been designated the successful bidder in the auction process.”