CommTouch shareholders and IPO underwriters may heave a sight of relief. In view of the difficulties that held up the IPO in the last two weeks, Paul Allen got into the picture at the right moment. With a glamorous name such as Allen’s, any IPO may be turned into a hit. If everything goes according to plan, CommTouch will raise some $50 million tonight, at company value of $200 million.
Paul Allen is one of Microsoft’s founders. His entry into CommTouch as the senior investor - through Vulcan Ventures and GO2NIT, which he owns - is a clear signal to Wall Street that CommTouch is not just yet another Internet company. CommTouch may draw encouragement from the fortunes of other companies in which Allen has invested. Priceline.com is a good example. Its share soared on Wall Street, bringing company value to $1.6 billion, and turning Allen’s modest $30 million investment into $1.25 billion.
Initially, Allen will put into CommTouch some $20 million in a private placement. CommTouch plans to make a public offering of three million shares at $15-17 per share. At the same time, CommTouch will issue to companies owned by Allen 1.3 million shares at $14.88 per share. CommTouch will also offer Allen options on an additional 1.1 million shares at an exercise price of $12.8 per share. Exercise of the option will bring CommTouch another $14 million.
Following the private placement to Allen, the world’s third richest man will also win the title of CommTouch’s largest shareholder, with 17% of the share capital. Other CommTouch shareholders include Evergreen - 10.5%, the Apax-Leumi Fund - 8.5%, the Gemini Fund - 6.2, the Concord Fund - 6.1%, Nahum Sharfman - 5.8%, Gideon Mantel - 3.7%, Amir Lev - 3%, and Isabel Maxwell - 1.5%.
Apart from the fact that Allen’s name will be a jewel in CommTouch’s crown, facilitating its Wall Street debut, with a Wall Street IPO and Allen as an investor, CommTouch may be assured of business support and strategic weight.
GO2NET’s various acquisitions have earned it the most diverse collection of small and medium size online businesses. Its Internet communities comprise some 275,000 subscribers. GO2NET will offer e-commerce services to all businesses operating in its Internet communities. Following GO2NET’s investment in CommTouch, it will also be able to offer each site e-mail with a domain name.
This prospect carries great importance for CommTouch, whose business model is based on revenue from advertisements on sites in which it installs its e-mail services. The greater the traffic on the sites, the bigger CommTouch’s revenues. The addition of 375,000 points of sale may be a quantum leap for the company. Paul Allen, so it seems, is not just a glamorous name, but also a business asset.
Published by Israel's Business Arena July 8, 1999