GenesisIntermedia Falls on Pact With Delisted Firm (Update4)
By David Evans
Van Nuys, California, Aug. 17 (Bloomberg) --GenesisIntermedia Inc. shares fell as much as 21 percent after saying it will merge its money-losing car rental unit with MAII holdings, a company delisted yesterday by the Nasdaq National Market, whose chief executive is a convicted felon.
Genesis shares traded erratically, falling $3.83 to $14.46 before recovering to $17.95, a gain of 12 cents from yesterday's close. It was the stock's busiest trading day ever, with more than 3 million shares changing hands.
MAII shares attracted less investor interest. They gained 10 cents to $3.35 on trading of 400 shares.
MAII's CEO, Christie S. Tyler, resigned last year as CEO of Solution 6 Ltd., Australia's biggest supplier of accounting software, after he confirmed reports that he had a criminal record in the U.S. In 1985, Tyler, 43, was found guilty of possession of more than 50 pounds of marijuana in Texas. He received ten years probation. Tyler wasn't immediately available for comment.
Adnan Khashoggi, the Saudi arms dealer and financier, owns 37.3 percent of Genesis, a Van Nuys, California-based telemarketing company. He has recently been both a large buyer and seller of the company's shares.
Genesis will own 41.3 percent of MAII after the transaction is completed. Genesis will sell Car Rental Direct.com Inc. for $11.6 million, a 19 percent discount to asset value of $14.36 million on June 30, and use all but $400,000 of that sale price to buy 2.8 million shares of MAII for $4 each, according to a press release distributed by Business Wire.
Company executives weren't immediately available for comment.
Car Rental Direct, acquired by Genesis last year, lost $2.57 million on revenue of $3.96 million in the first half of 2001. CRD operates a fleet of 1,000 cars in Southern California and Arizona.
``With CRD operating on its own, it will not place further cash requirements on GenesisIntermedia,'' said Ramy El-Batrawi, chief executive of Genesis, in a statement. He said he expects CRD to be profitable by year-end.
MAII Delisted
MAII, which now trades over-the-counter, was delisted because it no longer complied with Nasdaq listing requirements. The company sold its only business, providing medical equipment to doctors, to ICN Pharmaceuticals on Dec. 31.
MAII, based in Plano, Texas, has 6.8 million shares outstanding and net assets of $25.8 million as of June 30. It had $27.7 million of cash and no property or equipment, according to its most recent quarterly report with the Securities and Exchange Commission.
On July 2, Genesis paid financier Carl Icahn $275,000 to help it raise cash for acquisitions. In return for a ``conditional commitment'' for a $100 million line of credit, Icahn also received Genesis stock options then worth more than $74 million.
No loans have been announced to date.
Genesis, with a market value of more than $400 million, had a negative net worth of $9.3 million as of June 30.
Losses
The company's loss widened to $15.7 million in the first half of 2001, from $12.5 million in the year-earlier period. Sales rose to $24.9 million from $14.8 million.
Genesis lost $33.5 million in 2000, on sales of $42.3 million.
Last month, Khashoggi sold 500,000 shares at a 21.7 percent discount to market price, and within eight days repurchased 260,000 at full price.
Khashoggi sold the stock to a mutual fund advised by the Orbitex Group of Companies. Until the end of last year, Orbitex employed money manager Courtney Smith, who recommended Genesis shares 18 times during appearances on CNNfn, CNBC and Bloomberg Television between December 1999 and March. In that period, Genesis shares rose eightfold. |
