Kontiki Begins New Life

Written by Ryan Lawler

Wednesday, May 7. 2008 at 03:15 PM EDT 1 comment

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As reported last week, peer-to-peer (P2P) firm Kontiki was taken private by venture firm MK Capital in a deal under which former parent company VeriSign Inc. (Nasdaq: VRSN) will continue to be a "large minority shareholder."

The firm reopened its Website at Kontiki.com with an announcement of the deal. As suspected, Eric Armstrong -- former VP of sales, media, and entertainment at Verisign -- took over as president. Todd Johnson, former CEO of Kontiki, was appointed chairman of the board.

For relinquishing Kontiki, Verisign received "approximately $1.0 million and 3,980,000 shares of Kontiki Inc. Series A Preferred Stock," according to Securities and Exchange Commission (SEC) filings. Representatives of MK Capital and Kontiki would not comment on the number of shares in the firm, but said Verisign would remain a "large minority shareholder."

When it was acquired in 2006, the Kontiki P2P platform was at the heart of Verisign's plans to build a content delivery platform. But for all the money Verisign invested in the firm -- $62 million was the purchase price in 2006 -- the acquisition seems to have been a failure.

SEC filings show that Kontiki generated about $10 million in sales in 2006, which dwindled down to $6.2 million in 2007. Meanwhile, the subsidiary's operating loss grew from approximately $14 million in 2006 to $25.3 million in 2007.

This is the second time MK Capital has invested in Kontiki. The venture firm first bought a majority stake in 2004 after the company had gone through a recapitalization. Although Kontiki had raised a total of $41 million before being taken out at $62 million, MK Capital general partner Mark Koulogeorge says his firm's investment in the company was "very successful."