OpenWeb Faces Collapse Amid Receiver's Warning of Insolvency

The temporary receiver for OpenWeb, Adv. Ehud Gindes, has asked the Tel Aviv District Court to halt collection proceedings by the Liquidity Fund. The fund has already seized approximately $9.6 million of the company's debt, which totals around $20 million. In his initial report filed Tuesday, Gindes warned that continued seizures are depleting the company's funds, preventing payments to employees and suppliers.

Simultaneously, Gindes noted that investment funds Insight and Georgian, along with other investors, have expressed willingness to consider injecting capital into OpenWeb, provided the collections cease. The company has been experiencing a cash flow crisis attributed to changes in the advertising market and high structural costs. This crisis intensified after Liquidity activated control agreements on OpenWeb's bank accounts and began collecting the debt.

According to the receiver, the ongoing seizures also hinder OpenWeb's ability to pay publishers, who are among its key business partners. OpenWeb, operating in digital advertising and community management, employs about 150 people globally. Founded in 2012 as Spot.IM, it raised over $390 million and was valued at approximately $1.5 billion in 2022.

However, the company has faced difficulties in recent years. By the end of August, its liabilities amounted to about 177.5 million shekels, including 61.6 million shekels in secured debt. The court appointed Gindes as temporary receiver earlier this month after the company sought protection from its creditors.

A significant factor exacerbating the crisis was the termination of its contract with Microsoft, a major client. Microsoft delayed payments and demanded refunds, citing irregular user activity, a claim OpenWeb strongly denies. Shortly before petitioning the court, OpenWeb had drafted a settlement with Mars Growth Capital, part of the Liquidity Fund, involving an immediate $5 million payment, agreed-upon cutbacks, and the return of some frozen funds. This agreement, however, was not finalized.

Before the legal proceedings, OpenWeb attempted a recovery plan involving potential capital injections of about $14 million from its main shareholders and another investor. However, according to the company's late September court filing, this plan failed due to Liquidity's demand for immediate debt repayment and its subsequent actions to seize company funds.

Now, the receiver's report indicates that investors are prepared to examine capital injections and provide new debt financing, contingent on an immediate halt to Liquidity's collection activities. Gindes is requesting the court to order the deposited seized funds be held by the receiver, approve a plan for reduced operations, and initiate a competitive process for selling the company's operations or finding an investor.