Paul Allen, John Malone Pour $190 Million Into Priceline.com
Technology investor Paul Allen and cable television operator John Malone came to the aid of Priceline.com Inc. on Tuesday, pouring $190 million into the struggling Internet retailer that allows shoppers to “name their own price” and giving its stock a badly needed boost.
Microsoft Corp. co-founder Allen, through his investment arm Vulcan Ventures Inc. and Malone, as chairman of AT&T; Corp. cable programming group Liberty Media Corp., delivered the much-needed cash injection and renewed confidence in the online retailer, a day after its stock price plunged to yet another all-time low.
Most of the money will go to Priceline’s discount site, WebHouse Club.
Liberty Media and Vulcan bought forward a contract for 8 million shares of Priceline’s common stock equal to about $23.75 a share, the companies said.
“It’s a great stamp of approval for Priceline because of the caliber of the investors and, over the longer-term, it will remove some of the pressure on the share price,” said Tim Albright, analyst with Salomon Smith Barney.
It did. Priceline shares rose for the first time since July 20, closing up $1.31, or 5.5%, at $24.94 on Nasdaq. The shares had dropped to a record low of $22.63 on Monday. Before Tuesday, the stock had suffered declines over six consecutive trading days, losing more than 40% of its value.
The investment entitles Liberty and Bellevue, Wash.-based Vulcan to acquire the shares as of Aug. 1, 2001, and no later than Aug. 1, 2002.
Because their investment is currently illiquid, Vulcan and Liberty Media will receive options from Priceline.com founder Jay Walker to acquire an equity interest in Walker Digital Corp., founded by Walker, at exercise prices based on valuations of between $1.5 billion and $1.8 billion.
Walker said he will use about $125 million of the after-tax proceeds of the investment to participate in the third financing round of WebHouse Club, also founded by Walker, which offers a discount gasoline and groceries service.
Walker said the forward contract would add no shares to the publicly traded float of Priceline.com and the shares represent a small percentage of his Priceline holdings.
