The former president and the former CEO of the embattled ride-sharing company Facedrive both issued news releases – September 6 and 7th respectively – attacking each other over the fortunes of the firm, and bickering over whether or not company shares could be legally divested.
Imran Khan, the co-founder and former president of Facedrive, asserted his right to sell his shares in the Toronto-based firm on September 6 in a news release, saying both Facedrive and the company’s former chair and CEO have publicly and privately criticized him.
Khan also alleged the company could be facing insolvency proceedings.
“I have been clear with Facedrive that I intend to monetize some of my position in Facedrive.”
– Imran Khan, co-founder and former president of Facedrive
Khan’s statement came as Facedrive’s shares have plunged and key executives – including chair and CEO Sayan Navaratnam on September 1 – have departed the company.
“Each has sued me,” Khan wrote, referring to the company and Navaratnam. “I have been criticized for selling some of my shares when, it is claimed, I was not responsible for whatever was achieved under Mr. Navaratnam’s leadership. While I believe my early efforts set Facedrive on a course for later success, public company shareholders are entitled to sell, even though they play no role in management.”
Over seven months, Facedrive’s shares on the TSX Venture Exchange dropped from a high of $60 to less than $6, The Globe and Mail reported, noting that, previously, the company had been one of the top 50 performers of the TSX Venture Exchange with a market cap of $5 billion in early 2021.
As of September 7, Facedrive shares were trading at $2.13.
Through a reverse takeover, Facedrive became listed on the TSX Venture Exchange in September 2019. “In connection with that listing, my company entered into a lock-up under which it agreed not to sell any Facedrive shares for a period of 18 months, and agreed to limits on share sales after the end of the 18 month period,” Khan wrote.
Khan alleged in his September 6 news release that as the 18-month period was about to expire Facedrive and Navaratnam pressured him not to sell his shares.
Noting that he co-founded Facedrive in 2016, Khan disclosed that on September 3, following the close of markets, Facedrive’s lawyer contacted his legal counsel about Khan’s availability for the second or third week of September. The reason? Khan alleged his presence is required for an initial hearing in a liquidating proceeding for Facedrive under the Companies’ Creditors Arrangement Act (CCAA).
“My counsel was further advised that the decision to file under the CCAA had not yet been made by Facedrive’s board,” he wrote, adding: “As I intend to continue to trade in Facedrive shares, and as Facedrive’s advice about a possible CCAA proceeding may be material to investors, I am disclosing the information that I received, so that it is available to all shareholders and prospective shareholders of Facedrive.”
In a statement of his own released on September 7, now former Facedrive CEO Navaratnam wrote that he initiated a lawsuit against Khan in the Ontario Superior Court of Justice in 2020 over Khan’s sale of Facedrive shares.
In his statement, Navaratnam alleges that Khan’s sell-off of his shares have “had a dramatic impact on the stock value, and has caused it to trend negatively almost every day thereafter.”
According to Navaratnam, Khan has sold hundreds of thousands of shares, earning millions of dollars, and that as of last week he learned that Khan intends to divest a further 786,000 shares. “All of this while management felt fundamentals and execution of our vision are stronger and better than ever,” wrote Navaratnam.
He added, “Mr. Khan’s decision to sell his shares has put his own interests ahead of those of Facedrive’s investors, employees and partners.”
During its roller-coaster ride, Facedrive began as a ride-sharing firm, moved to become a food delivery platform, acquiring Food Highway and Foodora. The company then built an electric vehicle subscription service before veering into contact tracing technology.
Navaratnam wrote that all the changes were part of his vision for the company, “something far more disruptive and transformational: an untapped ESG technology platform that could leverage mobility and logistical technology to bring consumers together and move the world forward.”
In the spring of 2021, the Ontario Securities Commission’s Corporate Finance Branch opened a continuous disclosure review on Facedrive dating back to 2020. Facedrive was asked to provide “clarifying information” about its Foodora asset acquisition, the HiRide acquisition, a consulting agreement with US medical device company Medtronics as well as the status of Facedrive’s early-stage and non-revenue generating “projects” during fiscal Q2 and Q3 2020.
For his part, Khan wrote on September 6 that in 2017 he recognized Facedrive needed more capital, so he approached Navaratnam about investing in the company. Navaratnam’s company Malar Group Inc. entered into a subscription agreement with Facedrive in 2018, with Malar subscribing for shares of Facedrive.
They then reached a shareholder’s agreement in which Malar gained the right to appoint two of the three directors, and Navaratnam replaced Khan as the company president. Subsequently, Khan left the board of Facedrive as well.
“It is up to each shareholder to decide whether they are a buyer or a seller. I have been clear with Facedrive that I intend to monetize some of my position in Facedrive,” Khan asserted in his September 6 statement.