Bill, I always think of you as the person who first brought Priceline.com to this thread. Do you think that's not fair? Or do you think its time a good time for Victor to make a comment?
Btw
You and Walker love greater fools...don't you?
>September 29, 2000
For Priceline's Big Investors,
The Stock Price Isn't Right
By JEFF D. OPDYKE and JENNIFER REWICK
Staff Reporters of THE WALL STREET JOURNAL
Priceline.com Inc. urges customers to "name your own price." Now some Priceline investors wish they could name their price on the company's stock, too.
Several big-time investors -- including executives who joined Priceline from high-powered "Old Economy" jobs -- have absorbed paper losses of more than $100 million apiece this week because of Priceline's recent woes.
Priceline Warns of Weak Revenue on Slow Sales of Airline Tickets (Sept. 28)
Shares in the Norwalk, Conn., company have slumped 46% this week, amid a warning that its third-quarter revenue won't meet analysts' expectations due to weakness in its core business of selling airline tickets over the Internet. The sell-off has shaved roughly $1.72 billion of the company's market capitalization. The stock rebounded a bit Thursday, trading up $1.13, or 11%, at $11.88 in 4 p.m. trading on the Nasdaq Stock Market, but that is still down 93% from the stock's all-time high of $162.38 set in April 1999.
The rapid losses in recent days underscore just how ephemeral the huge paper profits can be in the New Economy, even for smart investors such as Prince Alwaleed bin Talal, General Atlantic Partners and Richard Braddock, the former Citicorp president and current Priceline chairman. Indeed, Priceline's two top executives once were paper billionaires when the stock was trading above $100 a share.
It was Priceline's promise of luring consumers to its site by allowing them to name their own price on items ranging from flights to Bermuda to Bermuda onions that helped the company snag some high-profile talent. Heidi G. Miller also left her post as chief financial officer at Citigroup Inc. to join Priceline as chief financial officer earlier this year.
Mr. Braddock holds, outright and through options, about 12 million Priceline shares, according to First Call/Thomson Financial, a market-data provider. The result: His Priceline portfolio has slipped by about $119 million this week, to roughly $142 million.
Despite the sharp stock drop, at least one tranche of Mr. Braddock's options is safe: He was granted 3.75 million options on Priceline stock, set to expire in June 2008 -- exercisable at just 80 cents a share, according to Thomson Financial.
Jay S. Walker, Priceline's founder, has taken a dramatically larger paper hit. He controls nearly 38.1 million shares, meaning his portfolio is about $376 million lighter this week, though he has a Priceline portfolio valued at about $452 million.
Ms. Miller fares even more poorly. Her entire Priceline stake is in the form of options, two tranches that expire in February 2010 -- one million exercisable at $55 a share, and 1.5 million exercisable at $90 a share. The upshot: Her position currently is sunk down near the Titanic.
Priceline.com Stock Falls
The sharp drop in Priceline.com's stock this week pinched the pocketbooks of many smart investors. A look at who's hurting:
Name (position) Shares Owned* PAPER LOSSES
This Week*
Jay Walker (founder) 38.1 -$376
Richard Braddock (Chairman, CEO) 12.0 -119
Heidi Miller (CFO) 2.5 -25
General Atlantic (early investor) 17.4 -172
Vulcan Ventures/ Liberty Media (recent investor) 8.0 -79
Prince Alwaleed bin Talal (recent investor) 2.0 -20**
* Numbers in millions
**September purchase only, doesn't include shares purchased in May.
Sources: First Call/Thomson Financial, Wall Street Journal research, Baseline
Some executives took big pay cuts to join the online company. Daniel Schulman took a significant salary cut when he left AT&T Corp. to become Priceline's president and chief operating officer in July 1999. People familiar with the matter say Mr. Schulman's $300,000 annual salary from Priceline was one-third what he got as president of consumer long-distance marketing for AT&T. Priceline also awarded him a loan of $6 million and three million options on Priceline stock, exercisable at an undisclosed price.
For Priceline's famous spokesman, William Shatner, the paper hit could have been worse. Mr. Shatner currently holds about 90,000 Priceline shares, but sold 35,000 shares in March, when the stock was far higher.
Neither Ms. Miller, nor Messrs. Walker, Braddock, Schulman and Shatner, would comment for this story. A Priceline spokesman says: "They all have long-term views regarding Priceline."
Even Saudi Prince Alwaleed bin Talal, who has built a reputation investing in distressed companies, has taken his licks. The prince paid $50 million -- or $25 a share -- for two million shares of Mr. Walker's stake in Priceline earlier this month on the condition that the prince won't take ownership of the shares for at least one year. He had previously purchased $50 million of shares in May, when the stock was trading in the $40 to $50 range.
Prince Alwaleed said he is still bullish on the company despite the stock's steep drop. "This is a major overreaction," he said. His view: Priceline had a "hiccup" in the quarter but still is a good long-term buy. "We are backing Mr. Walker all the way," he said. He added that he is optimistic about Priceline's plans to move into areas beyond just airline tickets. "It's going to take some time," he said. "But I am a long-term investor."
Some of the biggest losers have been the deep-pocketed investors backing Priceline and its patented retail concept. Vulcan Ventures, the investment arm of Microsoft billionaire Paul G. Allen, and John Malone's Liberty Media Corp. in early August combined to invest $190 million in Priceline, paying $23.75 for eight million shares. They too will not take ownership of the shares for at least one year.
They bought the stake from Mr. Walker, who used $125 million of the proceeds to invest in a new round of equity financing of Priceline WebHouse Club, a closely held e-commerce venture that operates the Priceline.com grocery and gasoline program. Other investors in that venture include Liberty Media, Vulcan Ventures and Goldman Sachs Group Inc.
A spokesman for Mr. Allen wouldn't comment. Mr. Malone couldn't be reached.
Meanwhile, General Atlantic Partners, a Greenwich, Conn., venture-capital firm focused on software and information technology investments, has about 17.4 million Priceline shares in its portfolio. The drop has amounted to nearly $150 million, to about $206.6 million. General Atlantic originally invested $20 million in Priceline in August 1998, before the company's initial public offering. Through various sales, the firm has more than recouped its original investment.
General Atlantic executives, who hold positions on Priceline's board, declined to comment through a spokesman.
Not everyone is feeling Priceline's pain. One investor who has made a small fortune on Priceline is financier Carl Icahn. A person close to Mr. Icahn said he was wary of Priceline's business model and began selling short (betting on a price decline) the stock at $80, and shorted it all the way up to $160. It isn't clear if Mr. Icahn closed out the position.
Delta Air Lines Inc., likewise, made a killing off Priceline. The Atlanta-based carrier invested early in Priceline's history. It has already sold much of its stake, realizing a gain of $785 million for the fiscal year ended June 30. The airline still holds six million shares of Priceline's convertible preferred stock. |
