Slim Family Raises Stake in CDNow

Struggling online music retailer CDNow Inc. got a temporary boost as Carlos Slim Helu and other members of one of Mexico’s wealthiest families raised their ownership of the company to 9.2% from 6.7% and said they’re talking with CDNow about a “possible additional investment.”

The move comes a few weeks after the company’s accounting firm, Arthur Andersen, voiced “substantial doubt” about CDNow’s survival prospects because of a dwindling cash supply and mounting losses.

But the Slim disclosure sparked a rally in CDNow’s stock Friday, which jumped 81 cents, or 21%, to close at $4.69 on Nasdaq. The stock is still off 53% for the year to date.

Despite being one of the Web’s most visited shopping sites, CDNow has had losses totaling $212 million since it began its Web site in October 1997, including a $34-million loss on revenue of $53 million in the quarter ended Dec. 31.

Slim signaled a more active stance in his CDNow plans by switching the report used to disclose stock holdings. He originally reported the stake in a form that can be used only by passive investors. CDNow said it had talks with Grupo Carso, a holding company owned by the Slim family that’s also a major investor in Mexican telephone giant Telefonos de Mexico, at which Slim serves as chairman.

“We have held discussions regarding an investment or merger transaction with a number of parties and expect to continue holding discussions with a number of parties,” said Deborah Vondran, a CDNow spokeswoman.

The form switch in the past has foreshadowed an increase in holdings by Slim, whose net worth is estimated at $8 billion, according to Forbes magazine.

He used his Grupo Sanborns retailing unit in March to gain control of CompUSA Inc., the largest U.S. retailer of personal computers, after changing to a Schedule 13D for reporting his holdings with the Securities and Exchange Commission.

Earlier this week, Fort Washington, Pa.-based CDNow said it would complete a merger or obtain a significant investment by the end of the second quarter. The Slims “are currently engaged in discussions with the company regarding a possible additional investment,” the regulatory filing said. “Neither the amount, form or timing of such additional investment has been determined, and there can be no assurance that any such additional investment will be made.”