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Monster Sues Beats Electronics And HTC Over ‘Sham Transaction” Between Them

January 6, 2015 - Written By John Anon

The beauty of CES, is that there are a sheer load of companies present and all offering and promoting their latest gadgets, devices, accessories and washing machines (looking at you, Samsung). One of the companies correct and present at CES this year, is Monster. This company sells mainly accessories, headphones and the likes. Interestingly though, it is now being reported by WSJ (source link below) that Monster is in the process of suing Beats Electronics, its co-founders and HTC. If you are wondering why, then you will need to know some of the backstory.

In 2008, Monster helped design, produce and launch the popular Beats by Dre line of headphones. In return for the input, Monster said it received the licensing rights to the Beats brand. However, Monster claims they were then “duped’ into selling their shares through a “sham transaction” between HTC and Beats. This was due to a deal being struck, when HTC approached offering $300 million for 51% off the company. After which (within a month of the deal going through), Beats bought back 25% of the sold shares from HTC again. This is where the first stage of the ”duping’ is said to have happened. By going through this method, Beats were able to end their relationship with Monster due to a ‘change of ownership’ clause in the contracts, which effectively forced Monster to hand over all intellectual property rights to Beats.

However, Monster CEO, Noel Lee did own 5% of the shares himself. Following on from this buy back approach by Beats, Lee decided to reduce his 5% stake (which is being claimed would be worth $100 million now) down to 1.5% due to fears of what was happening. Following on from this, Lee then further sold the last of his remaining shares when he was informed by ‘the board’ that they would not see any ‘liquid return’ for those shares for the next couple of years. ‘Duping’ stage two. Eight months after Lee had effectively sold the last of his shares, the Beats by Dre line were sold to Apple for a whopping $3.2 billion. The case is now resting with the California Superior Court until there is some response from those accused. So what do you think? Was Monster duped by Beats and HTC?