Two U.K. dot-com executives facing big losses and dwindling cash have hit upon a novel strategy for struggling Internet entrepreneurs: Stop spending, give what’s left of the money back to shareholders, and use proceeds from your own holdings to buy the company.
Stephen Rist and Stephen Butcher, co-founders of virtual real estate broker Easier!, have a familiar Web story. With nothing more solid than an idea , a commission-free broker selling client information to marketers , they raised £11.2 million ($16.3 million) on London’s Alternative Investment Market in February, at the height of the Internet boom. Easier! stock rose from its initial £1.50 to £3.30 before the Internet bubble burst one month later. By late November, after the company had announced a £6.76 million loss for its first six months in operation, Easier! shares were down to a piddling 25 pence.
Rist, 37, and Butcher, 44, decided to return £5 million in cash left over from the IPO to their increasingly skeptical investors. “It’s disgraceful the way other Internet companies just burn through their cash pile until there is nothing left,” says Rist.
He and Butcher haven,t given up on Easier! After a £3 million advertising campaign, Easier! is the best-known real estate site in London; until recently, it had more listings than any other broker. After revising their business plan, Rist and Butcher feel they can make a go of it.
Although details of their negotiations are secret, they will use their share of the remaining cash, £1.86 million, to secure the financing for their bid to reclaim their company. Some might question whether entrepreneurs who have lost a pile of investors, money should be allowed to buy back the business , using the same investors, money , but Rist doesn,t see a problem. “The process is being handled exclusively by the company’s three independent board directors,” he says. Any sale would also have to be approved by the U.K.,s Takeover Commission.
