Gobi LPs short-changed by VisionChina dispute

Both Gobi and its co-investor, Oak Investment Partners, have been locked into a dispute for more than a year with VisionChina, the media company which acquired DMG from them in 2009.

"With VisionChina not honoring its contractual obligations, Gobi's LPs - who include college endowments, pension funds, charity foundations - are suffering, as this money is supposed to be distributed back to them," the source said. "They need it for their budgets and they can't get it."

The litigation between VisionChina and the venture firms began in December 2010, when the Chinese company accused the vendors of fraud - a claim which the courts later threw out. Having filed a counter-claim of their own against VisionChina for failing to keep up with the anniversary payments for its purchase, Gobi and Oak were however granted an attachment on $30 million of VisionChina's assets earlier this month.

The venture firms then went on to file a motion for summary judgment and asked for an award of the $60 million owed to them by VisionChina. They also issued a letter calling for the replacement of VisionChina's co-founder, Limin Li, as chairman of the company's board, claiming that the business had lost 95% of its value under Li's leadership.

VisionChina is listed on the Nasdaq and is backed by venture capital firm Milestone Partners and digital media network Focus Media. Focus Media has recently come under fire from research firm Muddy Waters, which alleges that the company has lied about its business and deliberately overpaid for acquisitions in an attempt to hide losses.

News of the impact of the case on Gobi's LPs comes as a recent report into M&A revealed that post-closing claims against PE firms have shot up since the global financial crisis, causing cash to be held back from exits and IRRs to suffer.

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• Topics
• LPs
• Venture
• Media
• Gobi Partners
• Oaktree Capital
• China
• Venture