A potential storm cloud hangs over what promises to be one of the hottest initial public offerings of 1999.
iVillage, the popular online women’s network, has been sued for breech of contract by Todd Kenner, the company’s former chief financial officer.
Kenner is seeking to block the company’s IPO, scheduled for early March, if the company doesn’t follow through on a promise to give him 100,000 iVillage shares. The IPO is expected to raise about $50 million.
In the suit, filed Jan. 8, Kenner alleges that iVillage CEO Candace Carpenter used the stock offering to lure him to iVillage last year from Gaylord Entertainment which operates country music channels and owns the Opryland Hotel.
After turning down other offers and accepting the iVillage job in July, Kenner moved his family to New York from Nashville. But during a corporate reorganization in October, Kenner subsequently lost his position and the stock options, which he said Carpenter valued at more than $1 million.
Stock options are typically paid out only after a vesting period or after certain performance milestones are achieved. Kenner’s termination came before he was fully vested although sources close to the case say his attorneys will argue iVillage terminated him without cause. They will claim that gives him a right to exercise his options.
iVillage spokesman Jason Stell called Kenner’s suit “absurd and frivolous” and said the company is confident it will prevail.
Bret Fausett, an Internet law expert with the Boston law firm Fausett Gaeta and Lund, said Kenner’s situation could become more common in the Internet industry.
“Stock options are increasingly exciting for employees, particularly senior level people, when they see stocks like Yahoo! and Amazon.com going through the roof. So I would expect we will see more of these (lawsuits) in the future,” he said.
iVillage and Kenner’s attorneys are current wrangling over where the case will be heard. iVillage wants it moved from Tennessee to a New York federal court.