Hey, whats up with SKUP?
Vegas dot-com's stock takes a tumble
By Kevin Ferguson / Las Vegas Business Press / July 10, 2000
A month after issuing about 30 pink slips, Las Vegas-based Preference Technologies' stock continues to tumble, dipping below $1 per share at one point last week, leaving many to question the future of a company that had single shares valued above $20 just five months ago.
The titanic effects of the company's stock began well before the crash of the stock market in April. One source said many employees are worried about the future of their jobs.
Calls seeking comment from chief executive Michael Calderone and president Bill Louden were left unreturned to the Business Press before press deadline last week.
Preference Technologies, formerly known as Stockup.com, develops a customizable Web product that updates news and information in real-time.
The company has been trading its shares on the "penny stock" Over-the-Counter Bulletin Board exchange since its inception 18 months ago. Stockup.com began trading under the symbol SKUP in February 1999, then last February switched to PFER, following the company's name change.
Earlier this year, it had ambitions of jumping to the Nasdaq, but withdrew its application in early June. The company said in a news release the withdrawal was in response to market conditions. "Preference will look to refile later in the year when market conditions are more favorable," the release stated.
A sinking stock value and difficulty in attracting venture funding are troubling signs for many unproven dot-coms because many Internet companies often have to rely on borrowed cash for years while they try to build a brand name and customer loyalty.
A week before the company launched its first product in late February, called the Global Information Gateway (GIG), its stock peaked for the year at 22.375.
The company has historically financed its operations to date through the sale of its common stock. From its inception through Dec. 31, it issued more than 26 million shares of common stock, raising $2.9 million, according to the company's financial statement.
On Feb. 24, the company tried to generate some energy by holding a news conference that lured local and state politicians, as well as local media, for the introduction of GIG. But the stock continued to dive, slipping to 13.75 on Feb. 28 and to $10 a share on March 13, which was three days after the tech-heavy Nasdaq hit its record peak of 5,132.
However, the company continued to hire more staff and increase its payroll, despite no revenue being generated. At the February product launch, Calderone said it had about 150 employees. Its financial statement dated March 30 lists a staff of "approximately 200."
Calderone told the Business Press in early June the layoffs were in all departments, but mainly in technological development. In a memo to the remaining staff, Calderone indicated difficulty in raising capital.
"It appears as if the development window given by funding sources just six months ago is now disappearing.... Because of this situation, and because we must be able to prove that not only can we generate revenues but simultaneously control our costs, we are forced to have an approximate 15 percent reduction in our work force," Calderone wrote.
The company's product is one in a cluster of competitors, all of which try to offer customized information available on a computer user's desktop. Four months before Preference Technologies' product launch, Microsoft Chairman Bill Gates told a standing room-only audience at the Comdex trade show in Las Vegas that the next generation of computer technology will center around personalizing the Web, similar to what Preference Technologies software aims to do.
Preference Technologies' own financial statement shows that it is in dire need of cash. The company spent more than $1.4 million on research and development for its proprietary technology, from when it was founded in February 1999 to Dec. 31, 1999. The company incurred a net loss of $8.3 million and had a negative cash flow of just under $5 million.
The firm's primary revenue stream "will be achieved from strategic alliances and subscriber fees," according to the statement.
Revenues to be generated would fund company operations, including funding for ongoing technological advances, it stated.
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