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The Six-Day Score
Stock traders discover Shelton software firm after venture company invests in Internet site
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Business New Haven
9/6/1999
By: Mitchell Young
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Shares in Shelton-based Information Management Associates took a wild ride last month.
On August 12, the company announced that IMA (NASDAQ: IMAA) subsidiary Buyingedge.com, a reverse auction e-commerce Web company, had completed a $10 million round of financing.
The stock soared from $1 3/8 to $14 per share and more than 40 million shares changed hands in a six-day period from August 16 to August 23.
As recently as August 6, just 4,000 shares of the company were traded at a high of $3 5/8 , but by August 20 daily volume reached more than 14 million shares and the stock reached a high of $14 before closing that day just under $10 per share.
Typical daily volume for the stock prior to this Internet-excited activity was about 30,000 shares per day.
Financing came from @Ventures, the affiliated venture capital arm of CMGI Inc. (NASDAQ: CMGI) and one of the largest investors in Internet companies. The private preferred stock financing represented approximately 29 percent of Buyingedge.com equity. Also joining were Wand Partners Inc., the leading institutional investors in IMA, Amicus Capital, LLC, and Madrona Investment Group, LLC.
The investment included $7.5 million from @Ventures, $2.0 million from Wand Partners, and a combined $500,000 from Amicus Capital and Madrona. IMA said the financing would be used as working capital for technology development and for marketing and business development initiatives.
IMA generates $50 million in annual sales from its core enterprise software business by providing call center and what the company calls "customer interaction software solutions" and services. The company's Edge 4.0 software suite was recently named "Best of CTI ( Computer Telephony Integration) Expo Spring '99" by the editors of CTI Call Center Solutions and Internet Telephony magazines.
Losses at the company as well as a $1 million lawsuit settlement with a customer helped drive the stock down to an annual low of $1 3/8 this spring from a pre-Internet frenzy high of $14 in April 1998.
The company reported losses of $6.392 million (67 cents per share) for the six months ended June 30. The company revealed it was starting trials of its Buyingedge.com site on June 6. Reports indicated that costs associated with developing the e-commerce cite were partially responsible for the company's losses.
Buyingedge.com is an online marketplace that gives registered members the ability to review competitive bids and negotiate for the lowest prices possible with more than 4,000 vendors of consumer goods and services. Membership is free to the buyer and, unlike sites that require consumers to "name their price" and commit to making a purchase, Buyingedge.com enables consumers to consult vendors, solicit more competitive pricing, or terminate the transaction at will.
According to IMA, the e-commerce site has already attracted more than 20,000 buy-side members and the number of product categories and participating vendors is growing rapidly.
IMA Chairman Gary Martino will serve as chief executive officer of Buyingedge.com, while IMA CEO Albert R. Subbloie Jr. will serve as chairman of the new enterprise.
"With this infusion of funds, we have the power to move Buyingedge.com forward as the market leader in the buyer-centric e-commerce marketplace," said Martino.
Brad Garlinghouse of @Ventures talked up his company's investment. "Buyingedge.com is revolutionizing the e-commerce business model by giving the consumer the opportunity to benefit from competitive bidding in an open and truly interactive buyer-driven marketplace. This is an unparalleled market opportunity, and Buyingedge.com is way ahead of the competition. Gary and the Buyingedge team are pioneers in defining this new category and will continue to lead the market," Garlinghouse said.
As a result of the funding, the company will expand operations in the immediate future and will move Buyingedge.com operations to a location in Redwood Shores Calif. so it can "more quickly capitalize on the availability of Internet resources and strategic partners."
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