Shopping.com Replaces a Key Financial Ally
Shopping.com, the money-losing Internet shopping service under scrutiny by regulators and shareholders, said Tuesday it ended its controversial relationship with its investment banker, Irvine-based Waldron & Co.
The Corona del Mar-based company said it hired Ladenburg Thalmann & Co. of New York as its investment banker and financial advisor to help evaluate “strategic opportunities.”
It isn’t clear what opportunities the company is pursuing. Officials at Shopping.com and Ladenburg couldn’t be reached Tuesday.
In a statement, Shopping.com Chief Executive John Markely said: “We feel that (Ladenburg) has the experience to assist Shopping.com in capitalizing on the near- and long-term opportunities which are before us.”
Waldron President Cery Perlesaid Tuesday that the parting with Shopping.com was a mutual and amicable one. “For them, it’s a move up in the banking arena. They need a bigger company that can raise more money.”
In over-the-counter trading Tuesday, Shopping.com shares were last bid at $24.50, up 50 cents from Monday. That gives the company a market value of $95.5 million.
What is clear is that Shopping.com must radically alter its fortunes if it is to be a survivor on the new frontier that is Internet commerce.
The company’s cash on hand plus existing working capital will not be enough to sustain current operations for the balance of the fiscal year, which ends Jan. 31, according to its quarterly filing with the Securities and Exchange Commission.
In addition, the company’s current liabilities of $2.25 million exceeded its current assets of $1.9 million on April 30. And its first-quarter loss widened to $4.7 million, or $1.17 a share, from $346,977, or 30 cents, in the same year-earlier period.
Sales in the three months ended April 30 totaled $917,836. The company had no sales in the year-earlier quarter.
Shopping.com needs annual sales of $60 million to break even, according to founder Robert McNulty, who resigned last month as chief executive.
Things don’t appear to be improving. The company said earlier this year that it will take a $2.8 million compensation charge in the second fiscal quarter ending July 31 because it issued stock options to employees at below-market prices.
Shopping.com also has been scrambling to raise money in recent months.
In May, it sold $1.2 million worth of 10% notes. And in June, it sold an 8% note convertible into stock at $16, which was 34% below its closing stock price that day.
Waldron took Shopping.com public at $9 a share last November and also was its biggest customer last year, providing 40% of the online retailer’s sales.
But the two companies have been under siege since spring, when Shopping.com stock soared to more than $30. In March, the Securities and Exchange Commission suspended trading for 10 days and the agency continues to investigate possible stock manipulation by Shopping.com and Waldron.
