MeVC Takes Steps To Resolve Conflict

Publicly traded venture fund MeVC Draper Fisher Jurvetson Fund I Inc. (NYSE: MVC) is laying the foundation to seek shareholder approval of a permanent investment advisory agreement.

Over the past two weeks, MeVC’s investment advisor launched an online shareholder newsletter, and John Grillos, the fund’s chairman, initiated talks with Millennium Partners, the fund’s largest stockholder. And, in a signal that it’s trying to keep business as usual, MeVC last week made a new investment, Private Equity Week has learned.

Millennium, a New York hedge fund, initiated a bitter proxy fight, attempting to force the fund to return liquid capital to shareholders, reduce its management fee and replace its investment advisor, which is largely made up of members of venture firm Draper Fisher Jurvetson. (See the chain of events in stories published in Private Equity Week on March 25, April 1 and April 15.)

MeVC now has until Aug. 15 to convince its shareholders to pass a new investment advisory agreement. To that end, MeVC launched a monthly newsletter on April 19 on Called Perspectives, the newsletter includes commentary from Grillos, profiles portfolio companies and rebuts charges made by Millennium against the fund’s advisors.

“Our brokerage operations want us to be talking with [Millennium] and with our shareholders,” Grillos says. He says that he chalks up MeVC’s reconsideration of its interaction with its shareholders to be one positive result of the proxy fight and related conflict that has plagued the fund for the last month.

MeVC’s board has authorized Grillos to contact Robert Knapp, managing director of Millennium, and the two have been playing phone tag since the week of April 15. As of April 23, they still had not spoken.

Lawyers on both sides have been working through the pretrial stages of a separate breach of fiduciary duty suit filed by Millennium against MeVC’s investment advisor in February. According to Grillos, the judge dismissed MeVC Draper Fisher Jurvetson Fund I Inc. as a nominal defendant in the case, leaving only MeVC Advisers as the defendant. On April 12, a judge was scheduled to rule on a motion to move the suit’s venue from Federal Court in Delaware to Federal Court in Northern California. PEW was unable to learn the result of that motion as of press time.

Millennium actually filed a second lawsuit on April 3 that just surfaced. That lawsuit asked the court to close MeVC’s annual shareholder meeting that had been adjourned from March 27. MeVC’s board actually did just that on April 5, but Grillos says the board made that decision based on timing not the lawsuit.

“This thing won’t be resolved in a court of law,” Grillos says. “It will be resolved at a [negotiating] table.”

Not to let all this distract MeVC from business at hand, the fund participated in the April 15 financing of CBCA Inc., an Oakland, Calif.-based third-party administrator of health benefits. The deal was not formally announced, and details were unavailable as of press time.

MeVC’s stock closed at $9.73 on April 25, gaining 9.3% from its $8.90 closing price on March 15 before the publicity around the conflict.

Millennium declined to comment for this story

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