Motricity secures $20M loan, mulls sale options

Struggling mobile content services firm Motricity has entered into a $20 million term loan financing arrangement with High River Limited Partnership, a venture capital firm owned by activist investor Carl Icahn, who owns approximately 14.6 percent of Motricity's outstanding shares. The firm said a portion of the proceeds from the term loan was used to close its credit facility with Silicon Valley Bank.

Icahn is Motricity's largest investor. His son Brett sits on Motricity's six-person board of directors alongside Hunter Gary, who is married to the daughter of Icahn's wife.

Motricity also stated that it has retained GCA Savvian Advisors as it explores strategic options including a spinoff, sale or other transactions involving its operator business and mobile marketing initiatives. Motricity additionally continues to review multiple financing options.

Motricity's latest moves follow a month after law firm Goldfarb Branham LLP announced a class action against the company concerning alleged violations of shareholder protection laws. Goldfarb Branham claims Motricity inflated its stock through distorted and false statements and may have engaged in insider trading.

"[Former Motricity CEO Ryan Wuerch] and senior executives have been accused of orchestrating an $11 million insider trading scheme that has had devastating effects on the company's performance," securities lawyer Hamilton Lindley said in a statement issued in late August.

Another class action suit filed by Kahn Swick & Foti LLC accuses Motricity of violating the Securities Act of 1933 and the Securities Exchange Act of 1934. According to the suit, Motricity priced its June 2010 IPO at $10 per share, for net proceeds of $51.4 million, but misled investors by asserting the company would "continue to achieve success despite the increasing popularity of smartphones." Kahn Swick & Foti claim that as a result of Motricity's statements, its stock traded at artificially inflated prices, peaking at $30.74 per share on Nov. 9.

Motricity and Wuerch agreed on Aug. 21 to terminate Wuerch's employment with the firm and to end his membership on its board of directors. Jim Smith, named Motricity president and COO in early 2009, currently serves as interim CEO. Motricity's board continues its search for a permanent replacement.

For more:
- read this release

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