When former Athlon Sports Communication CEO Stephen Duggan stepped down from his post more than a year ago, Spencer Hays — the veteran local executive who replaced him — told the Nashville Post the move had nothing to do with the Nashville-based sports publishing company's performance.
But a recent lawsuit filed in Davidson County Chancery Court reveals a different story — one in which the company is attempting to restructure after hitting financial rock bottom. And the suit points a finger at Duggan as the main person to blame.
“Duggan, in his capacity of CEO, had acted in a manner that significantly reduced the value of the company,” states the lawsuit from Athlon against Duggan and three other shareholders accused of holding up the company’s sale to a new entity — the ownership of which isn't clear — by refusing to sell their stock.
The complaint doesn’t detail just what Duggan allegedly did to destroy value, but it does paint a bleak picture. By last summer — half a year after Duggan exited the corner office — Athlon execs say, “the company was financially strained with almost no liquid assets; the company's credit line had expired and it was unable to renew or replace any necessary financing from traditional lending sources; [and] attempts to seek strategic options, including market interest checks for third party capital, sale, merger or joint ventures, failed to produce serious, credible or timely expressions of interest.”
Those dire straits represent a steep fall from grace for Athlon, which was founded in 1967 as one of the pioneers of collegiate and professional sports preview annuals. The company, now based off Briley Parkway near the airport and with offices in New York, Chicago, Cincinnati, Atlanta and Indianapolis, in 2010 launched a monthly magazine that reaches nine million readers through newspaper inserts.
But financial advisory firm 2nd Generation, a unit of KraftCPAs, last summer determined that the company was worth “$nil” and opined that a buyout price of 1 cent per share was fair. The merger entity set up to buy Athlon sent checks to shareholders, including majority owner Hays, for 10 cents per share in October. (What value that placed on Athlon as a whole is not known.)
But Duggan and the three other dissident investors instead asked for $6.18 per share. Later in the fall, they didn't reply when Athlon requested a justification for their demands.
“The failure of the dissenters to accept the per share price offered ... and their decision to ignore Athlon's efforts to resolve the mater ... demonstrates their bad faith intent to drive the company into a protracted, expensive and acrimonious dispute,” the lawsuit reads.
Athlon’s attorney, Paul Davidson of Waller, didn't return a message asking for further comment. The Post also was unable to reach Duggan, who now is a senior director at Viacom’s Cool Springs operation.
Athlon is asking the court to rule that the fair value of its shares is no more than 10 cents and that paying any more “would be unduly burdensome.” Barring that, Athlon wants the court to place a value on its stock or to appoint an independent appraiser to do so.
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