Investing February 10, 2010, 10:45PM EST

Proxy Voting Made Easy

New services like Moxy Vote—and upcoming regulatory changes—may boost the level of individual investors' participation in shareholder voting

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(This story has been corrected to show in the 16th paragraph that Minow said compensation proposals instead of confirmation proposals.)

It's hard to imagine Google (GOOG) meeting resistance to a proposed acquisition, but that's what happened in late 2009. Even more surprising, it was a startup Web site that had launched just a month earlier that gave a voice to retail shareholders of the target company, making it easier for them to participate in the proxy vote to oppose the deal.

Because of a campaign by activist shareholders, On2 Technologies (ONT), a provider of video compression software and related services, has yet to secure approval of the merger by shareholders representing more than 50% of its outstanding shares. Angered by management's acceptance of what they deemed an undervalued offer from Google last August, a group of On2 investors got busy on private message boards and steered fellow shareholders toward MoxyVote.com, a new Web site committed to educating and empowering retail investors by simplifying the complicated proxy voting process and enabling them to vote online.

John Marcoux, an engineer who owns close to 1 million shares of On2, learned about Moxy Vote rather late in his online effort to gather a group of shareholders pushing for a better valuation of On2's shares. With less than two weeks to go before a special shareholder meeting on Dec. 18 to vote on the merger, Marcoux and other activist shareholders managed to round up several hundred votes representing about 22 million shares, or about 12.3% of On2's 178.2 million total outstanding shares, to cast ballots on Moxy Vote.

"That was pretty impressive," he says. Although he hasn't seen a final count of the Moxy Vote ballots, he knows the vote "was very, very, very strongly opposed [to the merger]. Most of the people who went there to vote were being contacted by [people] opposed to the merger."

Revised Bid

After failing again at a Dec. 23 meeting to get the requisite number of votes, On2 rescheduled the vote for Feb. 17, 2010. In the meantime, on Jan. 7, Google sweetened its offer, adding 15 cents a share in cash to its prior all-stock bid of $106 million, or 0.001 shares of Google for each share of On2, boosting the deal's value to $133 million. On2 also pushed back the record date for shareholders to be eligible to vote to Jan. 15.

Marcoux stops short of giving Moxy Vote most of the credit for Google's higher offer, but he believes the Web site was part of a combined effort by dissident investors (which included articles in publications such as the Financial Times), to which the revised bid was a response.

While Marcoux and other shareholders feel Google's offer still undervalues On2's stock, they're no longer trying to get shareholders to vote on Moxy Vote due to some "behind-the-scenes" developments he declined to discuss. "I'm grateful that Moxy Vote has a [platform] that let us come together and speak our voice and its role got the attention of Google that this [deal] wasn't going to pass unless they did something."

Retail shareholders have historically been a disparate group, difficult to corral and activate, and the On2 merger vote was the first instance of them coming together to form a voting bloc online, says Doug Gates, vice-president of marketing at Moxy Vote. Unlike the experience of most startups, which can spend months and months wondering if anyone will use their service, "this is pretty good validation that we might be onto something," he says.

Advocates Guide Shareholders

Other Web sites such as www.ShareOwners.org and www.ProxyDemocracy.org are also dedicated to educating individual investors, but Moxy Vote is the only one that actually enables people to vote on corporate actions online. The company doesn't generate any revenue and its business model is still under consideration.