Net2Wireless withdraws from another merger, signing death warrant for Contact
06.12.2000 | 08:43
TheMarker.com
themarker.com
News released by TheMarker.com of the closing ofContact Networks, previously considered to be one of the hottest Internet companies in Israel, continues to make waves.
Ma’ariv reports on Wednesday that Contact.com was supposed to have been taken over by Net2Wireless, the startup whose merger with Utah-based Sensar Corporation (Nasdaq:SCII) has been cancelled.
Net2Wireless, headed by David Rubner and Hemi Davidson, was supposed to buy Contact for $20 million to avert its collapse. With the deal dead and buried, Contact - founded by Eyal Herzog and Arnon Dinor - was forced to close its doors and fire all of its employees.
In any case, Net2Wireless is in no condition to buy anything right now, following the cancellation of its merger with Sensar.
Sensar stock is 98% down from its peak, to $1.5. Nasdaq yesterday announced that if Sensar went ahead and merged with Net2Wireless, it would be delisted. The stock exchange's reasons apparently have to do with two of the shareholders involved in the deal, with whom Nasdaq has had legal tangles in the past.
Performance of Sensar stock
In return for release from its obligations under the merger agreement wiht Sensar, Net2Wireless has agreed to allocate Sensar 3 million shares and an option to buy another million shares at $10 each. That price is significantly lower than $27, the price per share at the company’s latest placement.
For its part, Sensar will write off a $500,000 loan to Net2Wireless and will pay $1.5 million in cash for a some of the shares issued to it by the Israeli company.
The companies aren't disclosing how many Net2Wireless shares Sensar is paying for, making it hard to calculate the exact price per share paid by Sensar. But assuming that Sensar isn't getting stock for free, and is paying for most of the shares it got, it wound up investing in the startup at less than $1 per share. That is seriously below the price at which Net2Wireless netted investors and lower even than the $1.86 a share, the exercise price of stock options allocated to its executives, among them chairman David Rubner.
In other words, though Sensar is the one to transfer cash money under the aforementioned agreement, the one actually buying its freedom is Net2Wireless. The startup's main incentive behind its reverse merger with Sensar was to get a back door onto Nasdaq. With the door slammed, its incentive is gone. Net2Wireless’ activity was to merge into Sensar’s idle framework, thus becoming a company publicly traded on Nasdaq. |
