The plunge in the market cap of Jerusalem-based Answers Corporation (Nasdaq:ANSW) may jeopardize its acquisition of Lexico Publishing Group LLC. Answers has fallen 65% since announcing the acquisition in July 2007; the share fell 23% on Friday, but corrected upwards by 1% in after-hours trading to $3.96, giving a market cap of $90 million.
Lexico owns the Web properties Dictionary.com, Thesaurus.com, and Reference.com. Answers planned to buy the company for $100 million, even though Answers had just $9.2 million in cash at the time of the announcement.
Last week, the company filed a draft prospectus with the US Securities and Exchange Commission (SEC) to raise a gross $100 million; a net $93.5 million after deducting the underwriters' expenses. The company also reached an agreement with undisclosed institutional investor for an $8.5 million private placement of convertible bonds equal to 8% of the company's share capital. The proceeds from these two deals are intended to finance the Lexico acquisition.
However, Answers' value has fallen 44% since the announcement of the offering, which puts the company's ability to make the investment in doubt because its market cap is less than the amount of the planned deal.
Published by Globes [online], Israel business news - www.globes-online.com - on January 20, 2008
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