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Mothernature.com: Letting Nature Take Its Course

Last year, there were great hopes for Mothernature.com , an e-tailer of vitamins, supplements and other natural and healthy products. The company was part of the CMGI companies and in December, Mothernature.com went public. Unfortunately, since then, the stock has collapsed. It is now trading for 23/32.

Let's take a deeper look at Mothernature.com. There were $3.4 million in sales for the past quarter, which was up five times from the same period a year ago. What's more, gross margins improved from 12% to 30%. But the losses were heavy: $8.89 million. So far this year the company has lost $25.3 million.

The company has about 419,000 customers. In fact, the company has done a great job of reducing customer acquisition costs, which fell from $86 in the first quarter of 2000 to $42 last quarter.

Also, the company has been making strides in reducing its burn rate. In the past quarter, the negative cash flow was $5 million, which compares to $9.4 million in the first quarter. There have been important policy changes, such as increasing shipping charges.

But what is really appealing about Mothernature.com is its balance sheet. In particular, according to the company's latest earnings report, there was $29.7 million in the bank. In other words, Mothernature.com looks like it could be a break-up LBO deal (similar to the 1980s). For example, buy the company for $12 million, liquidate all assets and the result should be a gain that is probably in excess of 100%. It would put a smile on Carl Icahn's face.

Actually, another company has made a bid for Mothernature.com -- for $11.36 million. This came from another low-priced company, Sitestar , which actually trades on the OTC Bulletin Board (about 24 cents per share). Sitestar is an Internet holding company.

Currently, Mothernature.com is mulling the offer. Although, I would not be surprised that it is rejected. Mothernature.com will probably require a higher bid, which should help boost the stock price even further.