Desktop search vendor Copernic Technologies has called off a proposed deal to be bought by Mamma.com, citing a full-fledged SEC probe into stock manipulation at the Montreal-based metasearch company.
According to a notice posted on the Mamma home page, Quebec City-based Copernic notified the company on Friday that it was terminating a letter of intent paving the way for the purchase, which had been set to conclude by May 31. The notice said that Copernic considered that the recent escalation of an SEC investigation of activity in Mamma.com shares “makes it impossible to complete the proposed transaction.”
The notice also said that Mamma.com directors had expected the deal to go through as planned until receiving word of the termination from Copernic, and that the company is looking into the question of fees that Copernic may owe for breaking off the deal.
The cancellation came three days after the SEC announced it was formalizing a year-long study of share price activity and financial controls at Montreal-based Mamma.com. That investigation began about a year ago, one month after the price of Mamma shares tripled over two days on the news of a profitable 4Q 2003.
At the same time that it made public the news about the newly-formalized SEC probe, Mamma.com also revealed that its internal audit committee was examining whether “some individuals” had exerted undue influence on the company through undisclosed share holdings. Last January, Mamma.com chief financial officer Daniel Bertrand told the press that the SEC’s investigation included the possible involvement of convicted Canadian stock swindler Irving Kott and his two sons. Kott pleaded guilty last year to two felony counts of concealing material facts from the SEC in regard to ownership of a discount brokerage firm; he was given five years’ probation and a $1-million fine. In 1990, he paid a $4-millon fine to Dutch securities regulators to settle an investigation into “boiler-room” stock selling techniques there.
Earlier this year, Mamma.com announced that it would delay filing 2004 financial results until May 31 and has said that the SEC probe might require restatement of some previously released financials. PricewaterhouseCoopers LLP quit as Mamma’s managing audit firm in February of this year over disputes about the financial terms for the search company’s 2004 annual report. RSM Richter LLP is now Mamma.com’s auditor of record.
Mamma.com announced plans for the Copernic purchase in November 2004. At that time, Google, Yahoo, MSN and other search engines were unveiling beta versions of desktop search or outlining future plans. Copernic launched its own ad-supported version in September 2004. AOL Search began offering a version of the Copernic tool in December 2004 and has said it will license the company’s desktop search functions for a new AOL browser.
