FortuNet shareholders sue over stock acquisition

By Cara McCoy

Wednesday, Dec. 9, 2009 | 1:14 p.m.

Two shareholders are seeking class-action status in a lawsuit against FortuNet Inc., a Las Vegas company that supplies electronic bingo systems around the nation, and its leader, Yuri Itkis, for allegedly trying to acquire shares of the company at what they say is an unfair price.

Asher Jungreis and Constantine Giviskes, on behalf of minority shareholders of FortuNet, filed the suit Dec. 7 in Clark County District Court. They allege that Itkis, the company’s controlling shareholder, violated his duty as well as state law with plans to purchase shares of stock he didn’t already own for $1.70 a share.

In its request for class-action status, the suit says that as of Dec. 2, 11.05 million shares of FortuNet were outstanding. Itkis is the sole trustee and beneficiary of the Yurti Itkus Gaming Trust of 1993, which owns 75 percent of the company’s common stock.

The trust on Nov. 23 announced plans to offer $1.70 per share for all outstanding shares of the company in mid-December; if by doing so it obtained 90 percent of the shares, it could then obtain the rest through a merger, records show.

The complaint is asking the court for an injunction blocking the proposed transaction. FortuNet didn't respond to a request for comment.

Itkis, who according to Forbes was formerly a NASA scientist for 20 years before becoming CEO and chairman since 1989, is the father of Boris Itkis, who is a company director and its co-founder. Boris Itkis has served on the company’s board of directors since 2006 and holds some of the company’s patents for his inventions.

The complaint alleges that Yuri Itkis’ interests are contrary to the interests of the minority shareholders. It additionally says Yuri Itkis has the power to dictate terms to acquire the stock at an unfair price.

The suit cites a press release issued by FortuNet on Nov. 23 that spells out its plans to offer $1.70 per share. The release said that price was about 28 percent higher than what the stock had closed at the prior 20 trading days.

The complaint counters what FortuNet said in the release: The suit says that as recently as Sept. 19, FortuNet’s stock had traded as high as $3.90 per share and says an analyst had predicted its price could go as high as $6.

“Thus, the consideration FortuNet shareholders are to receive is inadequate,” the complaint says. “Itkis is using (the trust’s) control of the company to pick up FortuNet at the most opportune time, at a time when FortuNet is trading at a huge discount to its intrinsic value.”

In a press release, the company said: “There can be no assurance that any transaction will occur or, if a transaction occurs, what the structure or terms of such transaction would be.”

FortuNet reported a loss in the third quarter. The stock closed Tuesday at $1.71.