Adir Shiffman takes Sleeping Duck Rich Listers to court in $60m stoush

He invested an initial $100,000 in 2017 for a 10 per cent share (10,000 shares) and an option to later acquire another 10 per cent, court documents from the Supreme Court of Victoria reveal. But he claims that a condition of the investment was that he be given a major say over the business.

“I am never a passive investor, not my style,” Dr Shiffman wrote to the founders in January 2018, court documents show.

But by November 2020, the relationship had turned sour. Dr Shiffman said he learnt that the founders had begun issuing more shares in the company, rather than the founders issuing options to purchase their shares, diluting his equity.

The founders deny that Dr Shiffman would have any control.

They point to emails where Dr Shiffman stated that he looks for “the ability to leave the founders in total control”; he “always leave[s] his destiny in the hands of the founders”; his “role is all about supporting founders”; that he makes no “demands for control” and he could be “cut … without any notice, without any reason”.

Dr Shiffman alleges that in April 2021, the founders paid a dividend of $15 million to the shareholders and another $6.36 million in September 2021.

The shareholders included the sole-director companies of the founders’ wives, Sibani Nirula and Stacey Lobo.

The dividend included two payments of $1.35 million to Prateek Bandopadhayay, an associate of the founders, to exercise options he was granted in the company without Dr Shiffman’s knowledge.

The options had an exercise price of $450 per share (based on a company valuation of $45 million) and Dr Shiffman claims his shares were already worth “substantially more” than that.

Dr Shiffman claims he was progressively excluded from the company, including rebranding, website redesigns and extensive marketing campaigns. He also objected to the pricing of the new Mach II product, court documents reveal.

“Let’s speak tomorrow because I believe we are $8-10m at risk (cash) with this strategy currently,” he wrote. The founders subsequently ignored Dr Shiffman’s strategic recommendation and proceeded with the pricing as proposed.

In March 2021, Dr Shiffman prepared a “47 Day step-up sprint” strategic plan to “rapidly accelerate the business towards the next stage of growth and professionalism”, which was also ignored, court documents claim.

In late May 2021, Dr Shiffman agreed to bring the relationship to an end, but he claims the founders failed to help sell down his shares.

Dr Shiffman is seeking orders to restore his shareholding to 20 per cent of the company, or damages – which, based on a $300 million valuation, would be worth as much as $60 million.

The case is expected to go to trial on October 16. Both Dr Shiffman and the Sleeping Duck founders declined to comment.

Dr Shiffman writes occasional columns for the Financial Review.