Since the commercialization of the Internet in the mid ’90s, much attention and hype have been focused on the convergence of this dynamic new, interactive communications medium with traditional media. A revolution was promised, and it’s fair to say this promise has been kept.
Today consumers can download songs from Napster (yes, you still can) and its numerous variants. Users can listen to Internet radio stations while working on their PCs. They can watch video clips on any number of online news sites.
While it’s not always a consummate experience – there’s nothing like a long buffering pause to break the mood of a song, and watching someone’s lips moving five seconds before you hear them speak renders much online video unwatchable – delivery technology continues to improve and eventually will eliminate these nagging problems.
One company that rushed to capitalize on this ‘Net-driven media convergence is among the top gainers on Wall Street so far this year. Online broadcaster NetRadio has skyrocketed 166% in trading since Dec. 29.
That’s the good news. The bad news is that NetRadio faces potentially insurmountable problems that make it an exceedingly risky bet for investors, including pending delisting from Nasdaq’s National Market.
NetRadio, which closed Monday at 50 cents per share, has seen its revenues decline on a year-ago and sequential quarterly basis. Fourth-quarter revenues of $430,000 were down 36% from Q4 ’99 and 6% from last year’s third quarter.
Net loss for Q4 was $3.5 million, or 35 cents per share, a solid improvement over both Q4 ’99’s net loss of $5.6 million, or 60 cents share, and the $4.4 million net loss in last year’s Q3. Net loss for fiscal 2000 was $16.3 million, or $1.63 per share.
With only $11.5 million in cash at the end of last year, NETR’s burn rate will be fatal before long. On Monday the company received some help in the form of debt relief. Navarre Corp., the parent company of NetRadio and still a major shareholder, said it has forgiven $5.5 million in debt owed by NETR in return for a cash payment of $1 million.
This action by Navarre, which pushes NetRadio’s total assets to $9.2 million from $3.7 million, also gives the company some ammunition in its battle to avoid delisting. Nasdaq requires listed companies to carry minimum total assets of $4 million. Unfortunately, NetRadio falls far short regarding two other listing requirements. Its public float of $3.2 million is
well under the required minimum of $5 million, while shares last met the minimum bid price of $1 way back in October.
NetRadio executives have a delisting hearing with Nasdaq on Wednesday. Should its bid to stay on the national board fail, the company will request that its stock be listed on the Nasdaq SmallCap Market. In a press release, company officials acknowledged that this “could have a material adverse effect on the market price of, and the efficiency of the trading market for, NetRadio’s common stock.”
Which pretty much says it all.
