According to a report in Wall Street & Technology, former TradingLinx CEO Gordon Henderson has the backing to resurrect the failed alternative to GSTP/axion4 and Omgeo. The reports says:
After a two-year run which featured more twists and turns than a daytime soap opera, it appeared earlier this year that the time had come to etch an epitaph on the TradingLinx tombstone. But days after the company’s assets — including the source code — were legally abandoned by the estate’s bankruptcy trustee, one person was still trying to acquire them on the cheap: former TradingLinx CEO Gordon Henderson.
All perfectly legal, Henderson is attempting to get a hold of something that nobody else seems to want: source code to software that automates post execution, pre-settlement trade handling, a la Omgeo and the GSTPA. So why is it that software which at least 50 people worked on for over a year, while burning through $8.5 million (not to mention leaving almost $2 million of debt) holds no interest for anyone other than Henderson?
Most programmers say the reason is that source code only retains its value when in the hands of those who wrote it and that reading someone else’s code, with the intention of reviving the software, is akin to finding an abandoned boat with the original crew nowhere to be found.
Former TradingLinx employees who worked on the code say they have no idea what Henderson could do with it, especially considering that they made up the crew and have certainly left the boat.
“If someone took the initiative to gather the group together they could probably bring it back to life and save a fortune in software development. If not, it’s probably not worth that much,” says Chris Marty, former TradingLinx vice president of technical development.
Getting the crew back together will probably be tough considering how staffing cutbacks were handled last summer. At that time, most employees were told to take vacations, only to be informed later that their jobs no longer existed. According to bankruptcy documents, many, including Henderson, are owed thousands of dollars in salary. Some, promised that the company would soon be getting cash, worked well into the fall without pay.
The lack of interest in the TradingLinx code and the reason the company filed for bankruptcy have little to do with the quality of the product. In fact, when the company filed for bankruptcy on Nov. 8, 2001, it has a successful pilot in production with Credit Lyonnais’ processing equity trades. “I’ve worked on a lot of software in my time and this was a very good piece of software,” says Marty.
But the company never did get the infusion of cash it so desperately needed to stay afloat. Again, not because the product was flawed but because one of the key investors decided it did not want its share of the company diluted. According to sources, Singapore-based Financial Solutions had blocking rights to prevent any future investment in TradingLinx and wound up exercising those rights to keep out much needed money.
“These guys, when they were given the choice of saving the company, said they would prefer to have the company go bankrupt rather than have a smaller share,” says the source.
Henderson concurs, “The whole thing was totally illogical. We had to file for bankruptcy and so the investor (Financial Solutions) ended up with nothing. We raised the money but we couldn’t get it in.”
That proved to be the final straw in a series of missed opportunities, each of which might have kept the company afloat until revenues started flowing in. Sources say one savior looked to be Bloomberg, which had interest in becoming a TradingLinx customer/investor early in 2001. It was a great blow to the company’s hopes when Bloomberg cancelled the investor portion of its plans in May of 2001, depriving the company of an anticipated, and much needed, $10 million infusion of cash.
Next to take a look at TradingLinx, according to sources at the company, was SunGard, which recently announced it was planning to become a player in the virtual-matching game. SunGard, however, walked away from any deal in June of 2001, after the TradingLinx board priced the company near $30 million — according to SunGard about eight times what the company was really worth. SunGard would not comment for this story.
TradingLinx sources say that a major obstacle to their company’s success was its “dysfunctional” board of directors. The company, which was started in France and later opened a N.Y. office, had a nine-member board which essentially split into two camps. One, headed by co-CEO Justin Lowe, lobbied for closing down the unwieldy Paris operation (which was pursuing a different development agenda based on the Domino programming language) while the Paris contingent, led by co-CEO Jean-Baptiste Lionelli, lobbied for shutting down the N.Y. operations (working in Java).
Eventually, Lowe won out and in January of 2001 the TradingLinx Paris office was shut down with 17 people fired in one day alone. Henderson came on in March of 2001 and removed Lionelli as his first order of business on March 7.
At that point, former employees of the company say, there was some hope that Henderson would be able to turn things around but the massive layoffs on July 2 scattered the all-important development crew throughout the industry. Not surprisingly, four of those critical employees, including TradingLinx’s chief architect, wound up at a competitor: Omgeo.
With four TradingLinx employees in house, it might seem that Omgeo could make use of the defunct company’s code but according to Lee Cutrone, Omgeo executive managing director, that’s not the case. Cutrone says that while the expertise of TradingLinx employees can be leveraged to assist in the development of Omgeo’s Central Trade Manager, the TradingLinx source code would have no value to the company.
So what does Henderson think he can do with the code? The former CEO says he can’t explain just yet, as he is still attempting to finalize a deal with TradingLinx’s former landlord at 100 Wall St. to take possession of the abandoned hardware and software. A representative of the landlord, Reckson Associates, who declined to be named, says that Henderson approached the company a few days after the abandonment, saying he was starting another firm and wanted to buy the equipment for around $15,000.
While in bankruptcy, GEM Auction Corp was brought in by the trustee, Richard O’Connell, to appraise the equipment and software. When GEM valued everything at around $15,000 Henderson made his first offer for the estate which was deemed not worth the time and expense it would require to process the transaction. Henderson says the trustee indicated the offer would have to be closer to $150,000. So Henderson waited until the estate was abandoned to the landlord before making another offer, which was still on the table at press time.
Henderson says that despite what skeptical former TradingLinx employees say about his chances with the code, he can make it work. Patents are no problem, he says, as only one patent application was ever filed (Justin Lowe and Jean-Baptiste Lionelli are the co-authors) but that application was for an early version of the software and has never been approved.
Regarding the code, he says, “I have been building software for 25 years…I think I can figure it out. There is financing involved and I have a good and cogent plan going forward.”