BUSINESSWEEK ONLINE : OCTOBER 23, 2000 ISSUE
BUSINESS WEEK E.BIZ -- NET WORTH ONLINE EXTRA: Quokka's Big Score While cash-strapped dot-coms fall by the wayside, the Net sportscaster behind NBC's Olympics site has raised $76 million to stay in the race Last month, Quokka Sports Inc. looked like it was in pretty serious trouble. The Web site, which provides online coverage of events like mountain climbing and sailboat races, was running so low on cash that it was in danger of following other Net content companies such as Pseudo Programs into dot-com oblivion. With only $23 million in cash at the end of the second quarter and a monthly burn rate of $7 million, it looked like it had until October to raise more money or close its doors. And all this was taking place just as the company was beginning its Net coverage of the Sydney Olympics in cooperation with NBC. Well, Quokka has snatched victory from the jaws of defeat. On Sept. 18, the San Francisco company revealed that it had raised $76 million from a sale of convertible debt to a group of companies that includes Accel Partners, Deutsche Bank, and the finance unit of General Electric, the parent of NBC. Originally, Quokka had hoped to raise $50 million, but so many companies were willing to put up the dough that the company decided to get more money while it could. "We actually had well over $100 million in demand," says Alan S. Ramadan, Quokka's president and chief executive. "Companies that take on cash in these times are much better off." DILUTED STOCK. The fund-raising did come at a cost to existing shareholders. While Quokka's stock was trading at $7.40 before the deal was announced, the new investors have the right to convert their debt into stock at any time at a price of $5.42 a share. In other words, the existing shareholders will see their interest in the company diluted in order to get the necessary cash. The announcement of the deal drove down the price of Quokka's stock 19%, to about $6 a share. Just a month later, with tech stocks in a meltdown, Quokka's deal looks like a bargain. Financing for Net companies is drying up across the board, and the number of bankrupt dot-coms is growing longer every day. Quokka's stock has tumbled along with the rest of the tech sector, sliding to $3.50 from about $7 a month ago. Still, the $76 million gives the company enough cash to weather the storm. Ramadan figures that the company needs about $55 million in order to reach profitability, which he expects in the second quarter of 2002. What will the company do with the extra money? Ramadan thinks that the crash in tech stocks gives Quokka the opportunity to make acquisitions that it otherwise may not have been able to afford. He would like to broaden Quokka's coverage of sporting events to make the site a one-stop shop for virtually anything a sports enthusiast would want to see. For example, in July, Quokka cut a deal to acquire Total Sports Inc. for stock worth about $130 million. While Quokka had been covering extreme sports like mountain climbing, Total Sports brought online expertise in the coverage of more mainstream sports, such as professional baseball and college basketball. LINGERING. Quokka certainly made progress in boosting its reputation for online sports coverage during the Sydney Olympics. The company ran the nbcolympics.com site, which averaged 4 million page views per day during the games, according to market researcher Nielsen NetRatings. Quokka may have fallen short of the 10 million people it hoped to draw to the site, but it still attracted from 5 million to 10 million visitors. What's more, people stayed on the site for an average of 18 minutes per visit, even longer than the company expected. "For us, the Olympics were an incredible experience," says Ramadan. "We achieved what we set out to achieve." Just as important, Quokka has the cash that could keep it around for more Olympic Games in the future. By Peter Elstrom in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					EBIZ Contents for issue dated Oct. 23, 2000 INTERACT E-Mail to Business Week Online

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