Drake just got hit with a massive financial problem before his OVO brand got sold off.
A Florida-based investment firm called A.R.I. filed a 391-page court document claiming OVO owes them over $5 million in unpaid obligations, and they say the whole transaction with Authentic Brands Group and Vince went down without notifying them.
“We received no portion of the transaction proceeds. Important information concerning the transaction and the treatment of our rights has still not been provided, and we will seek to obtain that information through the court process since OVO has not provided it despite multiple requests,” a spokesperson for A.R.I. said.
The filing was made in Ontario Superior Court, and it raises serious questions about how the deal was structured and who knew what before the announcement.
A.R.I. provided financing to OVO through convertible notes, and the agreement included specific rights that should’ve triggered when the company was acquired.
According to the court filing, A.R.I. was supposed to either convert their investment into equity at a discount or receive a cash payment worth 40% more than their original principal.
Instead, they claim they received nothing and learned of the entire transaction through a public announcement three days after it closed on August 24.
The investment firm says OVO never told them about negotiations with Authentic Brands Group or Vince, a major violation of the information rights under their financing agreement.
A.R.I. calculated $3.5 million in outstanding obligations as of July 31, including interest, default fees, and what’s called a Make Whole Fee that was negotiated upfront to guarantee them a minimum 15% return on their investment.
The Make Whole Fee matters because it wasn’t a penalty they added later. It was part of the original deal structure before A.R.I. even invested.
OVO CEO Derek “Drex” Jancar signed off on it, and the agreement specifically stated that if the notes didn’t convert into equity before maturity, investors would get a payment ensuring that minimum return.
A.R.I. says they wouldn’t have provided the financing without those protections.
When Authentic Brands Group announced they’d acquired 51% of OVO’s intellectual property on August 27, the deal valued the IP at $117,647,058.82.
Drake retained 44% ownership, and Vince got 5%.
Public documents filed with the SEC say OVO debt was supposed to be repaid and that convertible noteholders would be paid directly from the purchase price, but A.R.I. says they never received a payoff letter, never authorized the release of their claims, and never got any of the transaction proceeds.
A.R.I. had already filed a lawsuit in British Columbia back in June claiming $3.2 million was owed, so this wasn’t some surprise claim that popped up after the sale.
The investment firm was already in litigation when the transaction closed, and they’re now pursuing their contractual rights through the courts.
