[aaronbrethorst]

Can someone explain to me how this works? I've never heard of a company returning money except in the event of a shutdown.

[ghshephard]

It's usually more likely to happen when you have a board that is firmly controlled by the people who've invested the money in the company, and, when they see a significant change in market conditions (or makeup of the company) - decide that their ROI will be greater if they withdraw some of that investment.

I'd be interested in knowing, though, what the precise financial transaction looks like. Dividend? I would think that they would try and avoid those tax consequences.

[ef4]

IANAA, but "return of capital" is non-taxable.

[ghshephard]

Thanks - http://www.investinganswers.com/financial-dictionary/investi...

[jcampbell1]

My guess, it is treated like a stock buyback of preferred shares.

[outside1234]

In particular, does this mean that the VCs get correspondingly less equity?

[adventured]

Not necessarily. The company could have been revalued in the process (since the market prospects clearly changed).

To some extent, this might be a deal for Viddy (aka as good as it gets). If the investors are in control of the company, they could have just closed the shop and returned all the funds.