Buenos Aires-based Internet media firm El Sitio Inc. — which targets
Spanish and Portuguese speakers in Latin America and the U.S. — Monday
moved forward with a plan to cut away its non-core services and focus
enhancing its Internet network and the development of interactive content.
El Sitio Monday said it sold its Argentinean connectivity business Netizen
SA, one of Argentina’s largest ISPs. Terms of the transaction were not
disclosed, but El Sitio said it would reveal the details in the near term.
The deal adds another 25,000 subscribers to Netizen, bringing it to a total
of 200,000 subscribers. Netizen was recently acquired by SkyOnline de
Argentina, which is actively looking for ways to expand Netizen’s subscriber
base in order to sell broadband connectivity and value added services to
those customers.
El Sitio recently announced that it would be divesting its non-core
connectivity services in Argentina, Brazil and Colombia. The sale of the
Argentinean arm comes on the heels of an announcement that the firm signed a
preliminary letter of intent for sale of its Columbian connectivity
business. That deal is still under negotiation.
“Our agreement with Netizen is a significant step in our planned divestiture
of non-strategic connectivity assets,” said Leandro Anon, chief operating
officer of El Sitio. “This transaction permits us to continue with our
strategy to focus on the development of interactive content.”
El Sitio common stock was trading up on the news of the
deal Monday morning, hitting a price of 68 cents a share off an opening of
64 cents.
But while investors appeared to be pleased by the sale, a class action
lawsuit against the firm, launched Friday, still looms large.
The law firm Stull, Stull & Brody Friday filed a suit in the United States
District Court for the Southern District of New York on the behalf of
purchasers of El Sitio common stock between Dec. 9, 1999 and June 7, 2001.
The suit alleged that El Sitio, Roberto Vivo-Chaneton, Roberto
Cibrian-Campoy, Horacio Milberg, Alfredo Jimenez de Arechaga, Carlos
Cisneros, Michael Greeley, Guillermo Liberman, Ricardo Verdaguer, Michael
Levitt and Sofia Pescarmona violated the federal securities laws by issuing
and selling El Sitio common stock without disclosing to investors that some
of the underwriters of the Dec. 9, 1999 IPO, including the lead
underwriters, had solicited and received excessive and undisclosed
commissions from certain investors.
According to the complaint, joint lead underwriters Credit Suisse First
Boston Corp. and Lehman Brothers Inc., as well as members of the
underwriting group Merrill Lynch, Pierce, Fenner & Smith Inc., Salomon Smith
Barney Inc. and Wit Capital Corp. allocated El Sitio shares to customers at
the IPO price of $16 per share. In exchange, the underwriters’ brokerage
customers allegedly had to agree to purchase additional shares in the aftermarket at
progressively higher prices. That requirement was intended to artificially
inflate the price.
