In the midst of a snowballing e-commerce shakeout, eToys Inc. bucked the trend Tuesday, selling $100 million in stock and warrants.
The sale of securities was made to a group of institutional investors led by Promethean
Asset Management; the other investors were not named.
The preferred stock is convertible into eToys Inc.
common stock at a rate based on market prices, subject to certain limits and
conditions, over the three-year term of the securities. eToys has the right
to redeem any or all of the preferred stock for cash, subject to a premium
and certain conditions, at any time over the next three years.
The preferred stock carries a 7 percent dividend yield, payable in either
cash or eToys common stock. The holders of the preferred stock have also
received warrants to purchase up to approximately 5 million shares of eToys
common stock at $7.17 per share over the next three years, subject to
adjustment.
The company, which has lost $220 million since opening in 1997, will use the
proceeds to fund working capital and other general corporate needs. eToys is
struggling to compete with Toysrus.com
eToys survival play comes at a time in the industry when many e-commerce and
news content firms are struggling to keep afloat. This week, Reel.com shut down its video and DVD retail
store when it couldn’t lasso cash from investors. Last week, media outlets
Salon.com and Oxygen Media were forced to lay off
staffers.
Last month, British high-end fashion store Boo.com through up the white flag and was
bought by Net services company Brighton Station.
Ironically, and in keeping with the tradition of watching a Net business
blossom via word of mouth strength, a new site waging guesses as to the
demise of dot-com has come into its own.
Cynically titled, F**kedCompany.com, the site began as
a game between friends, but has spread like wildfire to more than 20,000
players who have listed more than 2,400 companies that they predict are
doomed.
In related news, eToys Monday snatched up party-planning site eParties in a
stock deal valued at $1.6 million. The move was in keeping with eToys’
strategy to sell party products, which they announced last month. Prior to
the sale, eParties had laid off off much of its staff.
