2TheMart.com Sold Stock at Big Discount

2TheMart.com, an Internet auction site, sold shares at a discount of as much as 89% in the last month after an earlier attempt to raise funds fell short, according to regulatory documents.

The Irvine-based company sold 2 million shares Nov. 18 at $1.50, a day when the stock closed at $13.44, the company disclosed in a document filed with the Securities and Exchange Commission. 2TheMart also launched its Web site that day.

Net Investments Inc., controlled by Ohio investor Raymond Park, bought those shares, as well as 300,000 shares at $3.33 on Oct. 8, a price that was 33% below the day’s closing price. Net Investments now owns 4.5 million shares, or 18.2% of the company, according to a regulatory filing.

On Oct. 25, 2TheMart.com sold 1 million shares at $1, an 87% discount to the closing price.

The below-market sales followed the company’s unsuccessful effort over the summer to raise $10 million by selling 1 million shares at $10 each. 2TheMart said at the time that it was short of cash.

The shares fell 22%, or $3.13, on Tuesday to close at $11.13 in over-the-counter trading. In January, the stock rocketed 25-fold to as high as $50, after the company’s initial public offering. The shares plunged as low as $2.25 in October after the company’s Web site was delayed, amid the difficulty raising capital, and as its first auditor departed.

2TheMart lost $1.9 million between Jan. 8, when it began business, and June 30. It had no revenue. The market value of its 27 million shares has fallen to about $300 million from $1 billion in January.

A share purchase agreement in the Park investment calls for the controlling shareholders of 2TheMart to “take all actions necessary” to increase the company’s board to five members from two and to elect three independent directors satisfactory to Park’s company by May 9.

In filings this week, the company said that on Nov. 18 it reached reached an agreement with International Business Machines Corp. to pay about $1.8 million it owes for hardware and software in setting up its Web site. That amount, plus interest at an annual rate of 13.5%, is to be paid in 12 monthly payments starting Jan. 31.