NEW YORK (Reuters) - Three shareholders of digital music service Napster Inc are seeking election to the board, saying current management had not been aggressive enough in battling rival Apple Inc and Internet piracy.
Perry Rod, Thomas Sailors and Kavan Singh are preparing an independent proxy after their May 21 application to Napster’s board for nomination was rejected on June 13, according to a regulatory filing with the U.S. Securities and Exchange Commission on Thursday.
They asked other shareholders to vote for them, as well as on proposals to separate the roles of chairman and chief executive, on executive compensation and on a bylaw to require a majority vote for the election of directors.
Napster, which has 760,000 subscribers, has struggled to compete with Apple’s iTunes online music store, which has more than 70 percent market share.
The shareholder group criticized Napster’s management strategy in several areas, saying over a number of years it had had a “‘just wait it out’ mentality” in the hope that Apple’s dominance in digital music would fade or that Internet piracy would decrease.
Napster declined to comment.
Rod, 29, is an independent investor from Encino, California, Sailors, 49, is a managing member of Cloverdale Investments LLC, and Singh, 26 is an entrepreneur.
They said 85 percent of shareholder value had evaporated since Napster shares reached a high of $10 in early 2005.
They said Napster’s shares would be priced at $6.40 each, or $296.6 million, for a strategic buyer based on a comparative valuation of the $280 million CBS Corp paid for digital music site Last.fm. They did not name any strategic buyers in their filing.
The shareholder group also said the shares would be worth $1.79 if Napster’s assets were liquidated, based on their analysis.
The stock closed flat at $1.48 on the Nasdaq on Thursday.
Reporting by Yinka Adegoke