Homestore to Restate 2000 Financial Results
Homestore.com Inc., the Internet’s largest supplier of home-sale listings, announced Wednesday that it will restate its 2000 financial results and file new numbers by mid-March, fueling analysts’ doubts about the viability of the Westlake Village company.
On news of the expanding internal accounting inquiry, the Nasdaq Stock Market halted trading in Homestore shares until the company fully satisfies the exchange’s request for additional information. The sale price was 72 cents when trading was halted, after hitting a record low of 69 cents Monday.
Homestore, whose shares have fallen 97% in the last year, already had said it would restate financial results for the first, second and third quarters of 2001. That announcement led to the suspension of trading Dec. 21. Trading resumed Jan. 7.
The newest restatements involve historical accounting issues and do not relate to Homestore’s ongoing operations, said Chief Executive Michael Long. But that explanation was not enough to convince analysts that Homestore has long-term prospects for success.
“There are some very real concerns about this company,” said Derek Brown, an analyst at WR Hambrecht & Co., who has rated the stock “neutral.” “The new management team is being forced to pick up the pieces that are left of this company and try to push it forward. It’s going to be extremely challenging.”
Homestore announced the resignation of Chief Executive Stuart Wolff on Jan. 7 and named board member Joe Hanauer as chairman.
Jack D. Dennison, formerly with WebMD, was named chief operating officer, and Lewis R. Belote III was appointed chief financial officer.
The company said Wednesday that it expects its cash flow from operations to be positive for 2002. It said it had about $48 million in cash and cash equivalents and restricted cash of about $100 million as of Dec. 31.
That may not be enough to cover the slew of class-action lawsuits filed against the company this month. At least a dozen suits contend that Homestore and some of its officers sought to prop up the stock by issuing a false and misleading picture of company finances. Executives sold at least $16 million in Homestore shares while the stock price was still high.
In December, Homestore said it overstated revenue in 2001 by as much as $95 million.
Last week, the company said it was firing 300 employees this quarter, after reducing its work force by 20% in October.
“You’re looking at a very risky company,” U.S. Bancorp Piper Jaffray Cos. analyst Safa Rashtchy told Bloomberg News.
