Online Incubator Shares Fall With Lack of IPOs
Investors hoping that a recent rebound in shares of online-venture-incubator Internet Capital Group Inc. would last saw their hopes dashed Thursday, as the stock plunged $5.06 to $11.19.
The Wayne, Pa.-based company triggered the sell-off after saying late Wednesday that its third-quarter loss, including one-time items, ballooned to $264 million, or 94 cents a share, from $15 million, or 7 cents a share a year earlier.
The company also said it fired 35% of its staff and will take a charge of $25 million to $30 million. Of the 50 jobs eliminated, 24 were vice presidents or managing directors, said Michelle Strykowski, a company spokeswoman.
ICG gets a payoff when the Internet businesses it incubates go public. But ICG hasn’t had an initial public offering by a portfolio company since March, amid the worsening fallout among Net businesses.
“There’s no hot Internet IPO market, so these companies don’t have a business,” said Paul Meeks, manager of the Merrill Lynch Internet Strategies Fund.
ICG has cut corporate expenses, mainly selling, general and administrative expenses and interest payments on debt, to $100 million a year from $135 million, said Ed West, chief financial officer.
But its top 15 companies will require about $100 million in new funding from ICG next year, he said.
ICG said it will form separate companies for its European and Japanese operations and seek outside funding for those units, which own stakes in 14 closely held companies, by March 31.
The company said it won’t lead any rounds of financing for--and might not provide further financing to--45 of its 60 closely held U.S. companies.
“We’re very much moving from a land-grab area to an execution area,” Chief Executive Walter Buckley said in a conference call. “We are concentrating our resources.”
But investors apparently were unimpressed. The stock (ICGE) had climbed from $9.25 on Oct. 18 to $18.75 at the end of last week. It reached $212 early this year.
ICG’s woes dragged down CMGI Inc., another incubator. Its shares (CMGI) slid $3.88 to $17.94 Thursday.
