VGW Board Independence Raises Shareholder Concerns

Investor confidence in Virtual Gaming Worlds is being tested as the company prepares for a significant buyout. The plan involves a $5.05-per-share offer intended to consolidate control of the online gaming platform. However, minority shareholders are raising concerns about the independence of the board committee overseeing the process, especially given the close connections between committee members and the majority owner.

VGW operates a sweepstakes-based online gaming business and is majority-owned by a single entity that now seeks to acquire the remaining 30% of the company. The committee tasked with evaluating the offer includes existing VGW executives, which has led to doubts about whether they can act independently. An external adviser, Canterbury Partners, was appointed to chair the committee earlier this year but its involvement was not publicly disclosed until just before the offer was launched.

Three of the four committee members currently hold executive roles at VGW, meaning they report to the same person behind the takeover bid. One member is described as “independent” because they do not own shares in the entity making the bid. However, they do hold a substantial number of VGW shares, many of which are tied up in loan arrangements. This adds another layer of complexity to the committee's impartiality.

VGW maintains that internal expertise was essential for handling the legal and financial issues involved in the deal. The company also cites ongoing regulatory and legal challenges in the United States, where sweepstakes-related gaming sits in a legal grey area. Critics argue that internal experts could have offered guidance without participating in the final decision, which would have helped protect the committee's objectivity.

Despite these concerns, the committee was able to negotiate changes to the initial offer. These included a higher proposed price and the option for minority shareholders to carry their stake into the acquiring entity. While such adjustments may provide some reassurance, broader concerns remain about governance and transparency. These issues are especially relevant as private companies continue to face scrutiny over valuation practices in heavily regulated sectors.

Source: The Australian, Capital Brief, Yogonet