Idealab to See Payoff in Sale of Overture

Yahoo Inc.’s proposed takeover of Overture Services Inc. would be a final payday for Bill Gross’ Internet incubator, Idealab, which initially funded Overture.

But it wouldn’t be the windfall Gross and Pasadena-based Idealab might have envisioned at the dot-com boom’s height.

Privately held Idealab owns 3.1 million shares of Overture, about a 5% stake, according to Overture’s last proxy filing. Idealab is the firm’s fifth-biggest shareholder.

Gross, founder of Idealab and a director of Overture, also owns a small number of shares personally, Idealab spokeswoman Teresa Bridwell said.

Yahoo’s offer of cash and stock drove Overture’s shares up nearly 12% on Monday to $24.05 on Nasdaq. That values Idealab’s stake at about $76 million.

Bridwell declined to comment on how much money Idealab has put into Overture, except to say that it seeded the company with about $200,000 in late 1997. Overture opened for business as GoTo.com Inc. in March 1998, then went public through an initial stock offering in June 1999 at $15 a share.

Overture stock sold for a peak of about $110 in the fall of 1999, when the Internet boom was raging. It fell below $6 in 2001, but by January of this year got as high as $31. An earnings warning in the spring knocked the stock back below $11 in May.

At various times since the IPO, Idealab has sold Overture shares, paring its holdings to the current stake.

Idealab, launched by Gross in 1996, enjoyed some early successes such as CitySearch, which is now part of Barry Diller’s InterActiveCorp, and at one point planned an initial public offering of its own shares.

But the tech stock collapse that began in 2000 crushed the value of Idealab’s holdings.

A group of Idealab shareholders sued the incubator in January 2002, seeking its dissolution and the return of assets. That claim recently was dismissed, although the judge said a portion of the lawsuit seeking the removal of Gross and another Idealab director could proceed.