Valuable to new investors. Old investors get hosed. I really struggle with these sorts of situations. She’s presumably doing something similar with the new company so all the old investors who didn’t participate (presuming a pay to play) get hosed. Is that really fair?
In my experience, the alternative to a pay to play or similar situation in which the old investors get hosed is the company dying, so they get hosed anyway. The fact is, a messed up cap table or zombie company is not attractive to new investors, so cleaning it up is an unfortunate necessity.
One way to look at it is do you want zero or do you want pennies on the dollar for it?
Is it crappy? Yeah. Doubly so if being abused by the founder. There is a version of this that is just the best of two bad options though.
It leaves a bad taste in my mouth when the founder doesn't share the same pain as the investors and the employees but such is life and it's hard to draw a line anyway, especially for someone super rich and with star power like her.
IMO the investors deserve a fair price for her 'buying' her old trash. I assume they won't get it and she'll be able to buy her old trash for pennies, probably 100 of them.
A typical startup would require the consent of a majority of the investor shares for a sale of all the assets, so there would be investor protection and consent to this type of a transaction.
And indeed this article says “Almost all of Sunshine’s investors, who include Norwest Venture Partners, Felicis Partners, and SV Angel, have signed off on the deal, Wired cited the sources as saying.”
So the investors think whatever is happening is a fair deal.
It's "valuable" to the company and to new investors. It's quite the opposite to old investors. In the world of public companies, a "liquidate a shell company" trick like this is presumptively fraud. If you want to liquidate the company you have to buy back the stock at market price, not whatever your purchaser is offering.
It's legitimate only if the existing investors are getting enough liquidity back from the sale to make it worth the transaction. The article says that "almost" all the investors are on board, so... maybe.
Clean cap table and she probably provided a decent amount of the funding for the first startup. It's also more than likely a tax thing here. I don't think people ought to get too obsessed with the contractual details on this one.
There are lots of ways to see dimes in these scenarios like signing bonuses or bonuses for closing the funding or selling shares into the new funding. Also she already has more dimes than this failed attempt can bring so it isn't as big of an impact as it would be to someone with nothing.