22-Aug-2000 Tuesday
San Diego's CollegeClub.com -- which was
once at the top of the class on
the local dot-com scene -- got a flunking
grade yesterday, filing for
Chapter 11 bankruptcy as one of its chief
competitors rushed in to pick up
the pieces.
Student Advantage, a
similar service in Boston, said it plans to buy
virtually all of the troubled
company's assets, as well as picking up some
of the subsidiaries. But the
purchase depends on approval of CollegeClub's
bankruptcy.
Student
Advantage Chairman Raymond Sozzi was exultant about the deal,
noting that
CollegeClub had more than 1.9 million viewers in May, the last
month of the
college semester, putting it in the top 50
college-oriented
sites.
Sozzi says CollegeClub's user base will fit in
well with his own business,
which represents nearly 50 national retailers in
their college-targeted
marketing.
The buyout offer entails $7 million
in cash plus 1.5 million shares in
Student Advantage, representing about 4.5
percent of the company's
outstanding stock. In addition, Student Advantage
will pay up to $5 million
more if CollegeClub meets certain goals by
2001.
Left unclear is how CollegeClub's debtors will fare in the buyout.
A
Webcast to discuss the deal will air at 9 a.m. today
on
www.studentadvantage.com/investor.
The Chapter 11 filing follows
several months in which CollegeClub has had
two top-level shakeups, a
canceled stock offering and a series of layoffs.
Internet observers
stress that CollegeClub is not the only Web-based
business to be experiencing
such problems.
"This has been a tough summer for everyone" in e-commerce,
said Bob
Bingham, a retired dot.com millionaire who still tracks the market.
"The
business models that were getting funded early in this year have fallen
out
of favor. That doesn't mean they aren't valid. It just means they
aren't
sexy enough."
CollegeClub was founded in 1993 by a group of UC
San Diego students, with
the idea of letting phone users access and return
voice mail. That business
plan eventually evolved into the creation of a free
Web site for college
students, complete with chat rooms and e-commerce
features. CollegeClub
generated revenue mostly by selling marketing
services.
Through spring, CollegeClub was involved in an ambitious
expansion program,
buying up smaller competitors. But the company couldn't
keep up with its
mounting debt, which totaled $35 million last
year.
The company was slated to make its debut on Wall Street in June
with an
$85.3 million stock offering. But it halted the stock offering
shortly
before the shares were to be floated, rebuffed by a stock market that
had
tired of money-losing dot-coms.
Two key officials -- James
DeBello, chief operating officer, and Michael
Pousti, chief executive officer
-- quit when the stock offering was pulled.
In the months that followed, as
many as 175 workers lost their jobs.
Ruby Randall, who had joined the
company just eight months before as a head
of sales and marketing, was
appointed temporary CEO. But she quit within
weeks. CollegeClub's board hired
a business consultant, Steve Race, to
temporarily run the company until a new
CEO could be found.