SYTE withdrew its offer for FASH today. Interesting connection between Narax and Sitestar. From the New York Times, courtesy of InfoStream.com:
nytimes.com
January 1, 2001
Fashionmall.com: From Wallflower to
Most Popular
By JAYSON BLAIR and ANDREW ROSS SORKIN
Fashionmall.com, a little-known Silicon Alley online retailer, was never exactly a hot stock, even during the height of the Internet boom. Last week that may have changed: it seemed to become the target of a bizarre takeover plot.
Sitting in his cramped cubicle in his office on Madison Avenue in Manhattan, Benjamin Narasin, chairman and chief executive of Fashionmall, a Web site that sells designer clothing, read a faxed letter sent on Dec. 18 by a Beverly Hills company called Naraxcoei. The letter, signed by Michael M. Savage, the president of Narax, offered to buy Fashionmall for $3.50 a share in a deal valued at about $26.2 million. At the time, Fashionmall's stock was trading at $2.10, setting the company's value at $15.7 million.
Skeptical but curious, Mr. Narasin said he called Mr. Savage. After leaving two messages without getting a call back, Mr. Narasinchalked the letter up as a bad joke.
Until last Thursday.
That is when Nasdaq officials halted trading of Fashionmall shares after the usually sleepy stock jumped 22 percent. The cause: Narax released an announcement over the PR Newswire that detailed its bid for Fashionmall.
``It was strange,'' Mr. Narasin later said. ``You'd think they'd want to communicate with me if they wanted to do a deal.''
This was not the first time Mr. Narasin's company was the target of a supposed takeover. Months before, Sitestarcoei, an Enrico, Calif., Internet holding company, made a similar bid, offering $23.6 million for Fashionmall. In that case, too, Fashionmall's stock soared on news of the announcement.
Why were two relatively unknown companies trying to buy a company like Fashionmall at a time when the financial markets have soured on Internet stocks?
The answer is unclear, especially since the principal executives of the two other companies either did not return telephone calls or refused to provide details about their bids. But the run up in Fashionmall's stock has raised enough questions to prompt interest from securities regulators and Nasdaq officials, according to people close to the matter.
Fashionmall executives said they were concerned about stock
manipulation. A spokesman for the Securities and Exchange Commission declined to comment. A spokesman for Nasdaq could not be reached.
What makes the case particularly odd is the connection between the officials of Narax and Sitestar. Mr. Savage of Narax is also the president and a board member of a company incorporated in Nevada called TransAmerican Holdingcoei. And Frederick T. Manlunas, the chairman of Sitestar, is a former director of TransAmerican, whose address in S.E.C. records is listed with a corporate mail box and messaging service.
Mr. Manlunas, 32, said that his offer for Fashionmall was ``still on the table,'' but that he was not presently doing business with Mr. Savage and that he quit the board of TransAmerican nine months ago. Mr. Manlunas said that he and Mr. Savage had ``bumped heads'' and now had a ``very adversarial relationship.''
``I know it sounds very suspicious,'' he added. ``But we were not involved.''
In an interview late Friday, Mr. Savage at first only acknowledged that he had ``heard of'' Mr. Manlunas, but had ``no relationship at all'' with him, until he was told that S.E.C. documents listed Mr. Manlunas as a director.
``Eric has not been on the board of TransAmerican for six or eight months now,'' Mr. Savage said. ``Eric was originally involved in the acquisition of the entity that became TransAmerican.'' The registration statement listing Mr. Manlunas as a board member was dated March 13.
Mr. Savage, 79, said he did ``not own a single share of Fashionmall'' and had no interest in ramping up its stock price. Mr. Savage declined to say who his investment bank was or detail the source of his financing.
Narax, which bills itself as a small mergers and acquisitions firm, was incorporated in Nevada two years ago. The telephone number Mr. Savage listed on the Narax press release was for a cellular telephone. Officials at PR Newswire, which distributes press releases to media outlets, said that Thursday was the first time Narax had used their service.
In a news release, Mr. Narasin said that his only communication with Narax before the company's bid announcement was the fax, which said, ``This communication describes a nonbinding proposal and does not constitute a binding offer.''
Mr. Narasin speculates that Fashionmall had acquired such peculiar interest because it had stashed away at least $35 million in cash - more than the company's entire market value at the time of Narax's offer.
Dozens of dot-coms with low stock market value appear to have become the targets of hostile takeovers in recent months because they are cash rich and valued low by the markets. But a hostile takeover of a company like Fashionmall would be hard because insiders own 65 percent of the company's stock. Mr. Narasin alone owns 47 percent. And Mr. Narasin and each of the directors have signed agreements not to sell their Fashionmall stock without board approval.
Charles R. Geisst, a finance professor at Manhattan College and the author of ``Wall Street: A History'' (Oxford University Press, 1997), said that ``when you see the market go south like this,'' companies like Fashionmall often become vulnerable to corporate raiders. But he characterized the bids for Fashionmall as somewhat ``interesting'' for a variety reasons, including a connection between the two bidding companies.
While there are no official accusations or proof in this case that the offers were merely attempts to move the stock price, securities regulators have long held that in a market downturn, stocks are vulnerable to manipulation through takeover bids. An announcement of a takeover bid almost always increases the target company's stock price, and the lower the value of a company, the less likely investors will scrutinize the financing of a deal before reacting, Professor Geisst said.
``On a small deal, the idea of a hostile bid is easier to accomplish; it is also fair to say that it will affect the price of the stock more,'' he said. ``If the deal is worth a couple of hundred million dollars, people are always asking where the money is coming from. On a small deal, that might be someone's Christmas bonus. Your initial reaction is to take it seriously because it is not a lot of money.''
By Friday afternoon the Nasdaq again halted trading of Fashionmall's stock after yet another company, GenesisIntermedia.comcoei of Van Nuys, Calif., bid on it. Fashionmall's volume, normally about 39,500 shares a day, rocketed to 1.1 million and its price had jumped more than 49 percent over two days to $4.12.
GenesisIntermedia's offer was a stock and cash deal worth $52.5 million. Fashionmall issued another statement that said its board would review the offer, though company officials said they were skeptical of that offer, too.
If an investor had bought 370,000 shares of Fashionmall in mid-November when the stock was trading at $1.25 per share, about the maximum that could have been bought without having to report it to the S.E.C., he would have made more than $1 million by Friday.
Fashionmall, which Mr. Narasin founded six years ago, has remained a niche player for most of the Internet boom. Unlike other e-commerce shares that hit triple digits, the highest point its stock reached was $13 - on the day of its initial public offering in May 1999.
In its most notable achievement since then, Mr. Narasin bought the remnants of the British online fashion retailer, Boo.com, after it filed for bankruptcy after burning through $185 million in 18 months in one of the Internet's first and largest failures. He remade Boo .com into a fashion portal, pointing consumers to other sites that sell Boo-like fashions.
Mr. Narasin said he enjoyed running his Internet company and had no
interest in selling it yet - at least until the next suitor comes calling. |
