By Erin Joyce
As its stock trades for less than 30 cents in the aftermath of its scratched deal to be acquired by a rival Internet research and measurement firm, Jupiter Media Metrix is looking at its options for survival.
The New York-based company announced on Tuesday that it essentially didn’t have the money or time to overcome Federal Trade Commission objections to its $71.2 million merger plans with Calif.-based NetRatings .
Since calling off the deal, which regulators felt would create a monopoly player in Web research products and online ad measurement, Jupiter has hired investment firm Robertson Stephens, Inc. to help it explore strategic financing options.
Jupiter spokesman Susan Hickey says a newly-formed committee is keeping its mind open on all kinds of possibilities for Jupiter, including a possible sale of parts of the company.
“With our brand, our products, technologies and our people, we look to continue in the marketplace,” whether under the Jupiter name or something else.
“We’re keeping an open mind, and looking at what is best to preserve our assets,” Hickey says. “Certainly, the committee will be working quickly to pursue these or other options.”
Experts in restructurings and acquisitions say the Alley company must move quickly as its losses mount and cash reserves dwindle.
Its options might range from finding a White Knight investor, to a possible bankruptcy filing which might help expedite a sale of some or parts of the company.
As of the end of December, Jupiter had just under $16 million in cash, with an additional $6.6 million locked up in letters of credit as collateral for its current lease obligations.
Cash usage during the fourth quarter was $10.9 million, which includes operations and restructuring costs. Although it expects to continue slashing costs, the company could be down to about $6 million by the end of March.
Jupiter’s woes reflect the dramatic declines that many Internet-focused companies are coping with since the Nasdaq correction began in April of 2000.
For the full year, Jupiter’s net loss was $519 million, or $14.62 a share, much of it driven by amortization and write-offs from past acquisitions. In 2000, its net loss was $124.4 million, or $3.57 per share.
The biggest drop in revenues was in its events business, which went from $31.9 million in 2000 to $3.4 million in 2001.
Ben Boissevain, managing partner of New York-based mergers and acquisition firm Agile Equity, says with Jupiter’s stock price trading around 20 cents and its assets mostly intellectual property “it’s tough to come out of that hole” to recapitalize itself.
But Jupiter has a strong brand name in its favor, and its global research could prove attractive to an overseas firm looking for an acquisition.
Jupiter’s key business lines are its research products on a number of sectors such as e-commerce; Web site audience measurement features, which are widely used in the media and industry, and its online advertising measurement products such as AdRelevance and its most recent product called Campaign Analysis.
Boissevain says one approach to raising capital might be a private financing, known as a PIPE (for private investment in public equities), in which a private investor gets favorable prices on certain shares. But PIPEs have fallen out of favor as investors grapple with accounting concerns in the wake of the Enron accounting scandals.
Boissevain says another option might be to take the company private, similar to the course that interactive agency Agency.com took.
That decision would, of course, hinge on convincing investors that Jupiter’s assets accurately reflect its valuation. Currently, Jupiter’s market capitalization is just over $8 million.
Despite the company’s penny stock price, its shares are still a type of currency that it could also use in an acquiring another company with plenty of cash, adds Boissevain.
Boissevain notes that Jupiter begins its search as “an orphan, meaning its stock is not followed by Wall Street” analysts anymore. That keeps it off many companies’ radar and slows deal-making.
But if Jupiter and NetRatings wanted to find another way to revisit their merger plans, one option might be a bankruptcy filing, says Richard Tilton, a New York-based
bankruptcy attorney.
Not only would a filing for protection from creditors under Chapter 11 help bring about a sale quickly, it could put Jupiter in a position to petition the Department of Justice to take an “expedited” look at the merger again, based on financial difficulties.
Once a company is in Chapter 11, it’s quite common to secure a “bridge loan” from another company interested in buying its assets. One of the FTC’s objections to the merger was a loan NetRatings wanted to provide Jupiter as part of the acquisition. If Jupiter defaulted on the loan, NetRatings could have seized the assets that Jupiter put up as collateral over the FTC’s competitive concerns.
Tilton, the author of the soon-to-be published book “Bankruptcy Business Acquisitions”, says many Internet-related companies that signed expensive leases during the dot-com heyday have turned to bankruptcy court to relieve their lease-related liabilities.
Once under bankruptcy protection, companies have “rejected” their lease by not paying rent and claiming they no longer need the space.
“Then the landlord’s claim in bankruptcy is limited in dollar amounts,” he says.
That would explain why many landlords now require letters of credit from so-called new economy tenants as a way to protect their claim if the company does file for bankruptcy protection.
The landlord can then draw on the bank-issued letter of credit in the event of a default, and “in the case of a letter of credit, the landlord’s claim is ‘unrestricted,'” Tilton explains.
The bottom line is the company has options, adds Boissevain. “There’s always life left. Every company has options. It’s about making the best of them. But they really do need a White Knight right now.”
