The shareholders, seeking board seats, want the digital music
service to turn around its stock slump or pursue a sale.
Napster Inc. has struggled to catch the ear of enough customers.
Now the company is out of tune with some of its big
shareholders.
With its stock trading at $1.34 and subscribers leaving its digital
music service, the Los Angeles company is facing a proxy battle
with three investors who together own about 1.5% of the company.
They each want a seat on the board and are pushing Napster's
management to turn around its stock slump or pursue a sale.
The company, which bought its name from the defunct file-sharing
network, said Friday that it was continuing to look for suitors
through UBS Investment Bank. But its executives are fighting back,
dismissing the three shareholders as a musician, an ice cream
franchisee and a middle-management banker who are unqualified to
run a digital music business.
The dissident group has put forth "no substantive plan for how its
nominees will enhance value for our stockholders if elected,"
Napster said in a letter to shareholders Friday.
The three shareholders are attacking in advance of the Sept. 18
annual meeting.
In its current incarnation, Napster has been a high-profile
example of the challenges faced in finding a winning business model
in the uncertain world of digital music, which Apple Inc. dominates
with its iTunes store.
Napster has begun several initiatives, including a download store
to complement its subscription service. The efforts have done
little to lift the stock, which is down 31% this year, but
executives say they are poised for a comeback.
"The…
