Earthlink Network Inc., a cash-strapped Internet service provider, said it has secured a $15-million infusion, including $5 million from an investment group headed by billionaire financier and philanthropist George Soros.
The fast-growing Pasadena company, which has yet to turn a profit while it has spent millions building its network of Internet users, said it raised the money through a private placement of restricted, unregistered stock.
Earthlink Chief Executive Gary Betty said the money will be used to finance the company's expansion efforts through the middle of next year.
"We said during our IPO that we would achieve profitability at around half a million customers," Betty said. "This money will allow us to continue to drive toward that goal."
Earthlink currently has about 340,000 subscribers, up from 30,000 in 1995.
The lead investor in the placement was New York-based Soros Fund Management, headed by Soros, a longtime Earthlink backer best known for giving hundreds of millions of dollars to charities. Soros' charitable work was recently the focus of a cover story in Time magazine.
Soros' latest investment in Earthlink raises his group's stake in the company to 10% from 6%. A spokesman for Soros Fund Management declined to comment on the investment, saying the company does not discuss its individual holdings.
Earthlink said other investors in the private placement include Betty and other members of the company's board of directors and management team. Linwood A. Lacy, formerly chief executive of Ingram Micro Inc., a giant Irvine-based distributor of computer products, was also an investor.
The restricted shares cannot be traded for at least two years.
The $15 million replenishes Earthlink's financial reserves at a time when the company is investing millions of dollars in equipment to accommodate rapid growth in its subscriber base.
The rush to grab market share, combined with price-cutting pressure from well-heeled rivals, including AT&T; Corp., has sapped Earthlink's earnings. Through the first six months of 1997, Earthlink reported a $16.1-million loss on sales of $34.6 million.
Earthlink spooked investors and regulators last month after filing a financial report that warned the company could run out of cash before year's end.
Stock market regulators temporarily halted trading in Earthlink shares before company executives said the warning was included by mistake. Earthlink deleted the paragraph in an amended document filed with the Securities and Exchange Commission a day later.
On Thursday, Earthlink shares fell 63 cents to close at $14.25 on Nasdaq.