Inside Society Pass’s Legal Storm and Stock Plunge. How a Vietnamese tech firm’s ambitious plans collided with courtroom battles and financial challenges.
Legal battles, financial intricacies, and a plummeting stock value—Society Pass (SoPa), a Vietnamese tech company, faces a pivotal moment. Entangled in a complex web of court rulings, SoPa’s once-promising trajectory is at a crossroads. As we delve into this gripping saga, explore the consequences of strategic acquisitions, financial challenges, and a stock value that has taken a nosedive. In the realm of tech’s post-IPO landscape, SoPa’s journey raises pressing questions about the resilience of tech companies when faced with legal storms. Unravel the intricate threads of SoPa’s legal odyssey with us and gain insights into the challenges that echo across the tech sector.
SoPa’s legal predicaments come at a time when the company has been actively expanding through acquisitions. Throughout the year, the company acquired at least five firms, diversifying its services in the travel, retail, digital advertising, and e-commerce sectors. Among these acquisitions are Indonesia’s Newave Strategic, Vietnamese B2B firm VLeisure, Singapore-based telco Gorilla Networks, and Thai digital advertising platform Thoughtful Media Group. However, with the looming legal battles, SoPa’s strategy of aggregating assets is becoming increasingly complex and may strain its remaining cash reserves.
SoPa’s financial challenges are further exacerbated by its IPO, which raised nearly $28 million on Nasdaq in November 2021. However, the company’s struggles reflect a growing trend of small firms underperforming after their IPOs.
Mr.O’Connor is now seeking a summary judgment on October 18, with his legal team aiming to secure an additional $8 million, along with penalty interests, based on agreements with SoPa. He is also demanding $79,600 for unpaid salary, bringing his total claim against SoPa to “monetary damages of not less than $22.6 million,” as stated in court documents. SoPa has initiated an appeal against the partial summary judgment, which is currently awaiting resolution. Additionally, O’Connor filed another motion in the New York Supreme Court, seeking up to an additional $11.6 million (including penalty interest) that he asserts is owed by SoPa for his role in developing the company’s technology platform.
As of its June filings with the US Securities and Exchange Commission, SoPa’s cash reserves stand at $10.9 million, a sum far from sufficient to cover potential losses in these legal cases. Given that the company’s operating expenses for the first half of the year amounted to $10.1 million, concerns have arisen regarding the company’s financial stability. When questioned about SoPa’s financial situation and operations, the company’s Chief Operating Officer, Patrick Soetanto, expressed confidence in the company’s ability to defend itself in ongoing legal cases and maintained that he does not believe the outcomes will adversely affect the company’s long-term prospects.
However, SoPa’s legal challenges extend beyond the dispute with former CMO O’Connor. In a separate case, the Supreme Court of the State of New York ruled that the company must pay approximately $750,000 to its former Chief Technology Officer, Rahul Narain, for breaching an employment contract.
In its 2021 prospectus, SoPa acknowledged its involvement in various lawsuits and legal proceedings, many of which involved allegations by former employees. The company also disclosed an ongoing legal dispute with early-stage VC firm SOSV in the US, related to damages linked to the acquisition of Vietnamese point-of-sale startup Hottab in 2019. The legal battles have the potential to impose substantial costs on SoPa, as they may incur interest charges and court-levied damages. In the context of recent IPOs in the tech sector, particularly for companies with small-cap stocks, challenges have become increasingly evident, with companies like Ohmyhome and Ryde experiencing difficulties in maintaining their share prices.
SoPa, initially valued at $43.55 per share, has seen its share price plummet to just $0.48, marking a dramatic 99% decrease in value. The company received a Nasdaq warning on May 25 due to its stock price consistently falling below the required minimum of $1 per share. SoPa has until November 21, 2023, to meet compliance standards; otherwise, it risks delisting. Additionally, the company was removed from the Russell 3000 Growth Index in June. These challenges come after SoPa lost 90% of its stock value shortly after its listing, primarily due to the impact of COVID-19 on its operations. The company’s largest point-of-sale client, an undisclosed hotel chain, ceased operations in two out of its nine hotels starting in April 2020.
