Yellowave Settles Suit With Israeli Firm Newtech
Yellowave Corp., a former owner of hair salons whose efforts to become an incubator of Israeli technology stocks were derailed by allegations of fraud, said Wednesday that it had settled a lawsuit with a former merger partner.
Los Angeles-based Yellowave agreed to acquire Israeli company Newtech Broadwidth Ltd. in a stock swap last summer. Prosper Abitbol, who controlled Newtech and its subsidiaries, was to become Yellowave’s chief executive.
News of Yellowave’s transformation into a technology company sent its shares soaring more than 2,000% to a high of $24 on July 24, giving it a market value of $68 million. As of Wednesday, its value had dropped to about $3.4 million.
Much of the run-up came from the reported connection of Abitbol to Eric Benhamou, chairman of the giant 3Com Corp. Yellowave officials touted Benhamou’s association as representative of its high-powered contacts in the tech world.
But soon after the deal was completed, Laura Ballegeer, Yellowave’s chief operating officer, discovered that businesses Newtech claimed to own did not exist. She also found that the Benhamou link was tenuous. Benhamou acknowledged being a friend of Abitbol’s and a shareholder in some of his ventures but disavowed any interest in Yellowave’s operations.
The U.S. District Court in Los Angeles granted Yellowave a preliminary injunction against Abitbol and his associates in September, blocking them from taking any action on behalf of the company.
Shares in the company plunged to $6.75 in August before the American Stock Exchange halted trading pending an investigation. Yellowave shares resumed over-the-counter trading last month at 25 cents a share. They closed up 2 cents at 95 cents on Wednesday.
Under the terms of the settlement, Abitbol returned 7.4 million Yellowave shares and Yellowave dropped its lawsuit, ending the merger and the dispute. “This settlement removes a significant distraction as management focuses its attention on Yellowave’s future growth,” Ballegeer said.
Yellowave, however, still has no operating companies. Its sole asset is the $2.35 million in cash and securities it held as of June 30. Yellowave says it still hopes to acquire science and technology companies.
