Value America: No Bargain

Don’t throw good money after bad. Are you listening, Paul Allen? News hit
the wires that Value America is the latest in a
long line of struggling e-tailers getting a new lease on life, courtesy of
you-know-who.


Of course when you have as much money as Allen has, you can just as well
hang around your Malibu bungalow making origami sculptures of the Space
Needle all day long with a few of those ten thousand dollar bills. Whatever
floats your boat.


Do we even know who’s on that goofy currency? I think it’s actually Bill
Gates. Okay, I’m pulling your leg. It’s Salmon Portland Chase. Who!? Tuck
it away anyhow, cause it just might be a pop question on Who Wants to Be
a Millionaire
by this time next week.


I thought there might be some quasi-connection between Allen and this Chase
character. After all, Paul does own the Trailblazers. Then I come to find
out Salmon served a stint as Chief Justice of the Supreme Court, where he
fought tooth and nail to get greenbacks declared unconstitutional. Nah,
definitely no connection here.


But I digress.


So Value America got a handsome $90 million eleventh hour reprieve. But I
think this is little more than a bad investment that’s boxed Paul Allen
into a long-term investor. And it wouldn’t be the first time.


The company was founded by a fellow named Craig Winn. He’s one heck of a
used car salesman; and he’s also a few fries short of a Happy Meal, if you
know what I mean. But he convinced one Seattle billionaire to sink $65
million into his vision of a frictionless e-commerce company.


Paul Allen’s original investment set off a chain-reaction of additional
investors, attracted blue chip talent, and ultimately took the company
public this time last year. Just one problem. The inmates were running the
asylum. I won’t bore you with Winn’s long list of eccentricities and overt
improprieties, but to say delusions of grandeur would be an understatement.


His legacy is a veritable horror story of mismanagement, arrogance, and
greed that single-handedly drove Value America into the ground. The Board
finally realized the King wore no clothes, but by then, Value America’s
name was mud. After Winn got kicked to the curb late last year, the exile
has been scrambling to dump insider shares on retail investors to the tune
of 60 million buckaroos. Paul Allen lost roughly that much on his investment.


Now Winn rests comfortably in his Mount Vernon-styled mansion. No
apologies, no regrets, just laughing all the way to the bank. I’m not
calling Winn a crook, but I would if I were an investor in Value America.


These days, the e-tailer has some upper management with ambitious plans.
Paul Allen’s decision to give it one more go comes just as Value America’s
coffers are set to run dry. The company’s laid off half its workers and has
tightened the belt. But does anyone give two hoots? Insider selling and a
broken down brand have left Value America little more than a penny stock.


I honestly don’t know what Allen sees left in this company. It doesn’t even
boast decent takeover prospects. Maybe it’s time to put his investment out
to pasture. Either way, pure-play e-tailers are out of style without
yesterday’s sex appeal and there’s a better chance that leisure suits will
make a comeback.


Any questions or comments, love letters or hate mail? As always, feel free
to forward them to [email protected].

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