MessageMedia Gets $11 Million in Investment, Loan
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E-mail marketing firm MessageMedia on Monday said it had arranged for $11 million in new financing -- $8 million in a private placement and a $3 million loan.
New investor REBAR, a technology operating and holding company, joined current investors SOFTBANK Venture Capital and Pequot Private Equity in the private placement. MessageMedia also took out a $3.0 million collaterized loan from Wells Fargo Equipment Finance Company, in December 2000.
"We believe MessageMedia's award-winning e-mail solutions are a natural fit with REBAR's strengths and our customers needs: our more than $1 billion in revenues, a 400-person global sales force, and strong ties to the enterprise IT industry," said Howard Diamond, chairman and chief executive officer of REBAR, LLC.
Getting REBAR -- which itself has a strategic partnership with MessageMedia co-investor SOFTBANK -- in its corner is potentially a strategically significant development for MessageMedia. REBAR, through its Corporate Software division, has relationships with more than 5,000 customers, which could potentially become MessageMedia clients.
The deal values MessageMedia at $0.71 a share, $0.05 more per share than its closing price on Friday, which was $0.66. MessageMedia was trading up $0.06 at press time on news of the investment.
The deal comes in the wake of online advertising giant DoubleClick's purchase Friday of a similarly-focused private company, Toronto-based FloNetwork, for an undisclosed amount of stock and cash. That acquisition raises questions about the future of other independent e-mail marketing firms -- such as MessageMedia, Digital Impact, and ClickAction -- at a time of increasing consolidation in the industry.
With this most recent infusion of funds, MessageMedia has, at least, a chance of going it alone for a little while. The company back in December cut 100 jobs, which it said would eliminate $3.5 to $4 million in expenditures each quarter. At the time, it predicted it would be profitable -- before interest, taxes, depreciation, amortization, and other costs -- in the third quarter of 2001, and earnings positive in the fourth quarter of 2001.
What it didn't say then -- and declined to say in its most recent announcement -- is how much cash it has on hand. The company in its last quarterly earnings statement, at the end of the third quarter 2000, said it had $22.5 million in cash and cash equivalents, and posted a net loss of $19 million for the quarter. At that rate -- even considering a $4 million reduction in costs and $10 million in new funds -- the company must be running pretty tight on cash.
Unfortunately for MessageMedia, very few companies in the online advertising market have grown revenues during the last few months, and the company itself said its revenues for fourth quarter 2000 would dip from its third quarter numbers. So MessageMedia is pinning its hopes on 20 to 25 percent revenue growth in 2001, expecting modest growth in the first and second quarters.
MessageMedia clients include Cisco, Dell Computer, Columbia House, E*TRADE, Microsoft, EDS, Hoover's Online, and Bertelsmann.