"Any porno stock should be brought to my attention immediately."
Well, then put this one on your "watch list"
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A Public Offering of a Private Nature
By Mark Leibovich
Washington Post Staff Writer
Sunday, March 7, 1999; Page H01
"This is a great, great, great day in history."
The young entrepreneur is barking into his cellular phone, breathless from media interviews across Manhattan. He is rushing to catch a train home to Washington, and if time permits, he will join his parents in Philadelphia to watch his taped appearance on CNN. They are so proud that their son started his own technology firm, just like Bill Gates.
What they don't know is that Joseph Richard Preston, 28, wants to be the Bill Gates of "men's entertainment."
Late Monday, between dates with Forbes, WiredNews and USA Today, Preston filed papers with the Securities and Exchange Commission to sell shares of his company, Efox.net Inc., in an initial public offering. This would place Efox among the first "adult" Internet businesses to sell shares to the public.
Friends and associates describe Preston in terms not generally welcomed by public company chief executives: a "hustler," "young for his age" and "not the kind of guy I'd want my daughters to bring home." Yet he is asking investors to jump-start his Internet fortune by buying into a $7.5 million stock offering--even though Efox was incorporated barely a month ago and employs exactly one full-time employee: Joe Preston.
He says he has an eight-woman roster of models, who are paid in company stock. "They are our shareholders," said Preston, who also calls them "the company eye candy." He would not make any of the models available for comment.
Preston is a product of Holy Ghost prep near Philadelphia, American University and still attends church on most Sundays. He is also a byproduct of the Internet stock mania, a prospector on the seamier fringes of the electronic gold rush. He is, perhaps, a parody of the craze, proof that anyone, no matter how uncredentialed, can chase a stock market bounty. All he wants is to be a billionaire.
Adult entertainment is one of the few Internet sectors that consistently makes money. But on Wall Street it has been a pariah. Preston hypes himself as a transcendent pioneer, however, a "Kamikaze businessman" who is assaulting convention and wants you to know about it. He courts outrage and press attention through relentless use of his cellular phone. Brief articles on his planned IPO appeared in last Monday's New York Times and Washington Post, and a flood of coverage followed Tuesday. Preston spent much of that day laughing.
"Joe Preston is smarter, tougher and harder-working," he says between puffs on a Marlboro Light in the den-sized office he rents near the Bethesda Metro station. Preston is fond of advertising his sleep deprivation ("one hour last night") and is careful to end his sentences with the name of the person he's addressing. ("I'm changing the rules of the game, Mark.")
Efox is, by any measure, a skeletal and shoestring operation. Preston essentially runs Efox by shoe leather and cell phone, giving orders to persons unknown, quoting from the movie "Wall Street." "I'm up to my [rear] in more nuts than a fruitcake," he says, stomping down a Bethesda sidewalk.
Preston says he is going public now to seize investor excitement over the Internet. In addition, he said, "We are seeing the decline of Western Civilization," and that decline can be extremely profitable. He is skirting investment bankers and underwriting the stock offering himself--ostensibly, he said, because "I can't afford to waste time." As a practical matter, no investment bankers have offered their services.
Beyond wearing monogrammed shirts and a trimmed goatee, Preston pays little heed to the norms of respectability or confidence-building. He asked that this article not include the company's street address, and a fraternity brother who Preston described as "my best friend" would not allow his name to be used.
The spokesman for a former employer, Pennsylvania House Majority Leader Rep. John M. Perzel (R), was horrified to learn that Preston listed this affiliation on his Web site bio. "You're giving me a stomach ache," said Stephen Drachler when informed of Preston's venture. He confirmed that Preston once worked on the legislator's staff. Drachler recalls him as "a guy who is always hustling" and "always looking for an angle."
And yet, Preston is as certified as the Form SB-1 Registration Statement he filed last week with the SEC. It reads: "The company was organized for the purpose of creating, launching and developing the premiere online . . . men's entertainment destination featuring what the Company believes are some of the most beautiful women in the world." Preston recently placed an ad seeking models in the City Paper, which he said resulted in 125 interviews. "Only four of them met Efox's standards," said Preston, who is single.
He said that each model is paid 500 shares per photo shoot. This includes one "Stephanie E. Fox," partially nude, displayed with a cigar between her legs in a company brochure. "I'm not just an EFox supermodel," the caption says. "I'm an EFox stockholder."
Efox expects to sell shares for $6 each, and investors must buy a minimum $300 stake in the company. Per government regulations, Preston will place all investor money in an escrow account until Efox reaches a $1 million threshold--at which point investors will receive stock certificates or, if Efox can't raise $1 million, their money back. Preston said he has already raised $100,000 from friends and family members, and has invested $30,000 of his own money. The rest, he said, will come from direct appeals to what Preston calls "the Internet's vast population of [sexually enthusiastic] men." As of Friday, he said, several hundred people have asked about buying shares.
In securities parlance, this is called a "direct public offering," a do-it-yourself version of the traditional IPO. Such equity sales have gained popularity in recent years, said Tom Stewart-Gordon, editor of the Dallas-based SCOR report, which tracks direct public offerings. More than 500 companies made DPOs in 1998, he said, compared with 36 in 1990.
Do they work? Thirty-eight percent of DPOs reached their goal last year, said Stewart-Gordon. The successes are often retailers in non-urban areas where a clientele knows and trusts the proprietors. "Businesses shouldn't expect to sell a share to anyone they don't have a personal relationship with," said Drew Field, a San Francisco securities lawyer who specializes in taking small companies public through DPOs.
Few would associate online adult entertainment with the retail environment that can sell shares. But Preston adheres to a different calculus: Of an Internet's population he puts at 170 million, Preston figures 90 million are men. "All I need is a [tiny fraction] of 1 percent of them to give $300 each and this will lead to $7.5 million," he said. After a 30-day free trial, it costs $19.95 a month to become an Efox subscriber. Preston said 5,000 people have registered to be Efox members last week.
With the investment proceeds, Preston said he will expand his content offering, hire a management team and "tastefully package heterosexual men's favorite pursuits," according to the SEC filing. "Ladies, Automobiles, Sports and Stocks (The LASS factor) for its male-centric content."
Former associates describe Preston as a whirlwind of salesmanship with a knack for getting attention. In 1997, after a procession of public relations-related jobs, Preston began marketing cigar vending machines to bars, restaurants and golf courses. Called CIGARSir, the product received widespread media coverage, but Preston and a partner could not secure a patent for the machines and the business essentially died shortly after it began.
"Joe has an incredibly strong promotional bent," said Rob Engle, president of Engle and Co., a Tysons Corner public relations firm where Preston worked from 1991 to 1994. Preston asked Engle to invest in Efox, but Engle declined, citing his "more conservative investment strategy."
Friends praise Preston for his creativity and persistence. They cite the elaborate bachelor parties he has organized and the dogged pursuit of women he wants to date. "He is a wild man and a visionary," said his unnamed best friend, a Florida real estate developer and Efox investor.
He and others rave over Preston's appreciation for Efox's "human capital." According to a corporate philosophy statement, Efox models are "God's gift to this earth."
This might be slightly adrift of the theology Preston was exposed to at the Holy Ghost Preparatory School in Bensalem, Pa. Likewise, his parents raised him according to devoutly Catholic tenets, and Preston said he fears their reaction when they learn the exact nature of his Internet business.
"I don't ask for their permission," Preston said of his parents. "I merely ask for their forgiveness."
Then he bursts into an earsplitting laugh.
Staff researcher Richard Drezen contributed to this report.
In Profile
Efox.Net
Business: Provides "adult" entertainment on the Web
Based: Bethesda
Established: A month ago by Joseph Richard Preston, 28
Employees: One: (Joe Preston)
Initial stock offering: Filed documents with the SEC on March 1 to raise $7.5 million
Current revenue: $0
Web address: www.efox.net
SOURCE: Efox.Net
© Copyright 1999 The Washington Post Company |
