Vistar Media Loses Bid to Nix Suit Over Note-Equity Conversions

Marketing startup Vistar Media Inc. must face claims that it tried to cut out early investors by preventing them from converting notes into equity, a Delaware judge ruled.

The lawsuit accuses Vistar of structuring its financing transactions to avoid triggering any of the contingencies that would have automatically converted the promissory notes into common stock. It was filed in the Chancery Court in March by more than a dozen venture capital firms.

The company bent over backward to avoid a “conversion event,” then tried to force the firms to accept repayment with minimal interest instead, the suit says. It seeks ...