And then what?
manager, Michael Donahue became a member of a very exclusive group: the
Internet centimillionaire club.
The founder of InterWorld Corp., a business-to-business company in New York,
Mr. Donahue saw his stake rise to $448 million last year as InterWorld's share
price skyrocketed after an initial public stock offering in August 1999.
He then did what many red-blooded Americans would have done: He splurged, big
time.
Mr. Donahue bought a $9.6 million second home in Palm Beach, Fla. A polo
enthusiast, he ponied up $100,000 to help sponsor his own team there. He spent
a bundle more sharing in the rental of a Hawker Sidley private jet, the better
to whisk off to Palm Beach on weekend jaunts with his wife. "It was a lifestyle
thing," he explains.
Today, Mr. Donahue is a member of another club -- call it the 90% club -- of
executives whose companies' stock price has fallen that much or more from their
peak. The value of his InterWorld stake has plunged to $12.6 million, as the share
price has fallen 96.8% to $2.94 from a peak of $93.50 on Dec. 31. He was asked to repay part of a $14 million loan he took out with his InterWorld stock as
collateral. And the Palm Beach house? To help satisfy his lenders, he has put
it on the market for more than $13 million. "Going up was easy. But when it
starts going down, no one wants to talk to you," he says. "It's been the most
challenging personal experience of my career."
At least he has plenty of fellow sufferers. More than 60 companies -- most of
them start-ups that went public at the height of the Internet frenzy -- have
seen their stock nosedive 90% or more. They include such well-known names as
eToys Inc., Webvan Group, Internet Capital Group Inc., Ask Jeeves Inc. and
Priceline.com Inc. All told, according to market trackers Birinyi Associates,
in Westport, Conn., about $114 billion in market value has been erased among
the 25 worst-performing Internet stocks, which are down a staggering 95.7% on
average from their highs this year. Like so many Humpty Dumptys, executives of
those companies have had a truly great fall, with the combined losses of the
largest shareholder at each company adding up to about $14 billion.
Perhaps never before have so many been worth so much for so little time. At
the top of the 90% club is Shelby Bryan, a former Wall Street investment banker
who became chief executive of ICG Communications Inc., a fiber-optic
telecommunications company. Thanks to a 99.4% decline in ICG's stock, to 25
cents from a peak of $39.25 in March, his stake in ICG, once worth $89 million,
is now valued at just $550,000.
Jeff Dachis, the brash co-founder and chief executive of Razorfish Inc., a
Web-strategy and design company, had stock and options worth $281 million at
their peak. When the stock was riding high, Mr. Dachis was quoted as saying,
"There are sheep and there are shepherds, and I fancy myself to be the latter."
With his stake now valued at only $24.8 million, Mr. Dachis is singing a
different tune. "Anyone paying attention to short swings in a volatile market
has their eye on the wrong ball," he says.
Candice Carpenter, founder of iVillage Inc., a Web site for women, had a
stake once valued at over $100 million. It's now worth $890,000. Last month,
she was forced to sell a block of stock to satisfy demands from Merrill Lynch &
Co., which gave her a loan secured by her iVillage stock. And then there's
James Cramer, who founded TheStreet.com. His current holdings, which once would
have been valued at $235 million, are now worth about $10.5 million with the
stock down 95%. |
