After a dizzying stock plunge of 11 percent last Monday and cutting about 1,000 jobs the next day, Net consultancy firm marchFIRST Tuesday unveiled an employee stock option re-issuance program aimed at propping up flagging morale.
But even more than morale, the Chicago-based company needs an infusion of cash. marchFIRST filed its 10-Q report with the Securities and Exchange Commission late Monday, indicating that its current cash resources and existing sources of liquidity will not be enough to fund anticipated short-term cash needs. The filing noted that the company will need about $50 million in additional financing through the end of the year and that it will need another $50 million in early 2001.
The company, created last March through the merger of management consulting firm Whittman-Hart and Net consultancy USWeb/CKS, lost nearly half its stock value this month. Earlier in the year, marchFIRST stock
was trading at a high of $81.12 per share. It closed at $3.06 Monday and was trading at $2.18 mid-morning Tuesday.
The option re-issuance program is designed to help the company hold on to valuable employees while it seeks to rebuild shareholder confidence. Beginning next month, employees will be allowed to return outstanding options to the company for cancellation. Six months and a day after the return, the company said it will issue employees one new option for every three canceled, with the value of the newly issued options determined by the average of the stock’s high and low prices on the day they are issued. marchFIRST said that because of the way the program is structured it does not anticipate accounting charges associated with the new option grants.
“This option re-issuance program demonstrates our commitment to empowering our employees to share in the long-term success of marchFIRST,” said Thomas Metz, president and chief operating officer of marchFIRST. “Aside from giving our people the opportunity to secure options with greater growth potential, this program will allow the company to replenish its option pool for future grants. Additionally, by meeting employee needs in a fiscally responsible manner, we believe the program will help us build shareholder value.”
marchFIRST’s stock tumbled last week after the company announced it would delay its financial guidance call. On Oct. 24, the company missed third quarter earnings estimates by 19 cents a share with no prior warning to analysts.
But marchFIRST is not the only Net consultancy firm that has been hit hard. Analysts have been skeptical of companies across the sector, including Sapient, Razorfish and Eloyalty, as well as marchFIRST, saying there simply isn’t enough money to go around for building Internet-related concerns. That hit marchFIRST especially hard. At the time of the layoffs, executives of the company indicated that the company had hired too quickly to keep up with a demand for its services that never materialized. marchFIRST had about 10,000 employees around the world at the time of the layoffs.