Posts Tagged ‘Auction’
We are now in the final moments. Both bidders, me being one, are on a conference call with the company selling the domains. The conference call started a few bids earlier. Up until then, we had been receiving phone calls from the company. The company would then tell us the bid status and then we would tell them our increased bid. Since the bidding has gone on so long they decided to put us together on a conference call. I now knew who I was bidding against. It turned out to be the party I thought it was. At that moment I knew what the outcome would be.
Time can sometimes fool you. A few seconds can feel like an eternity. Using that logic I probably took years off my life during the few moments I waited after we gave our last bid. Our last bid was a large increase. I then hear the other party say…. 25k more. It’s over.
Was I disappointed? Of course I was. However, you can’t win every battle you go into but I do feel I did everything possible that I could have done. I also feel if we had went millions higher, he would have come back with 25k more.
Who was the other party? He was the former chairman of the company that was selling the domains. He is someone I have spoken with in the past and have the utmost respect for. I thought he had already owned these domains. However, as it turns out he did indeed own many great names, but these particular names were owned by his old company and not by him.
I believe he feels as strongly about generic domains as I do. I do not know for certain, but he probably was the one who registered them for the company originally and might have felt that they were like a part of him, sort of like children. I know that is the way many domainers feel about their domains. In the end, I feel he deserved them.
Here is the sec report filing on the sale:
On February 25, 2009, we entered into an agreement to sell the assets of Domain.com, our wholly owned subsidiary, to A. Emmet Stephenson, Jr., Inc. (“Mr. Stephenson”) in exchange for cash of $7,075,000. The assets of Domain.com consist of domain names, trademarks and corporation names. We conducted an auction for the assets and received bids from multiple parties, including Mr. Stephenson. Mr. Stephenson presented the highest bid, which represented the selling price, of $7,075,000 and the sale was completed effective February 25, 2009. Mr. Stephenson is one of our co-founders, has managed the Domain.com subsidiary since 2006 and owns approximately 20% of our common shares outstanding. Because the transaction involves a related party, the Audit Committee of our Board of Directors considered and approved the transaction.
Here is a list of the domains:
Domain Names
401-K.com
Airlines.com
Anniversary.com
Annuities.com
Birthday.com
Bookings.com
Bookshelf.com
Bourses.com
Car-Rental.com
Christmas-Gifts.com
Communications.com
Cumpleanos.com
Currencies.com
Dining.com
Distributors.com
Dividends.com
Doctors.com
Electronics.com
Exchanges.com
Excursions.com
Frequentflyer.com
Guidebooks.com
Hospitals.com
Investments.com
Municipals.com
Museums.com
MyValentine.com
Products.com
Profits.com
Royalty.com
Ships.com
Taxfree.com
Technology.com
Tee-Times.com
Ticketrez.com
Wedding.com
Wholesale.com
A day or 2 before the bidding starts, a wrench is thrown in. It is told to us that google has blocked their top revenue name. It is being switched to yahoo but we may not here revenue figures before the bidding starts. While we were not buying based on revenue, it was a material number and had to be considered. One thing I forgot to mention. When we originally bid in part 1, we had no revenue figures. The only party to have the figures was one of the other bidders that had been managing the domains.
The auction starts with our bid as the starting bid. There is a few million on the table. Bid increases have to be a minimum of 100k. One party tops us and we come right back. The third party drops out quickly. So now 2 parties remain. I have an idea of who the remaining party is and my gut tells me there is no way to beat him. I’ll explain why later. The other party has requested minimum bids to be reduced now to $25,000 from $100,000. This could be read 2 ways. Either they are near their maximum or they want to win and tell feel we are near ours and they would only have to go up 25k on their last bid instead of 100k. As it turns out neither of us was close to being done.
The board then asks that they want a final bid from each party. We don’t like this as we feel that it could favor the other party and demand that the current rules apply. It turns out the other party was also insistent that the bidding continue. The board relents and lets the bidding stay the same way.
The bids go back and forth by telephone. At first 25k bids are going back and forth. Then slightly higher. We have topped another million dollar mark and the bids kept coming. When we go up a 100k they go up 25k more. When we go up 500k more, they go up 25k more. We are now in the mid to upper 7 figures. The domains are worth considerably more in my opinion but since the toys.com auction has still not finished its process, it starts to weigh in the decision.
Then the next hurdle is put before us. The rules of the game get changed and there is no way to stop it. The other party guarantees that if he wins he will submit all funds by close of business the next day. The board tells us that this is what they are going to do. This most likely a tactic by the other party to get us out of the game. However, that would not be the case just yet. I call for a hail Mary. I quickly call partners to see what the max cash we can get together in 24hours and decide that is the number we have to do. I have no choice. Even if we don’t get this I want to make sure I squeeze as much blood as I can out of this. Its their court and ball and we have to play by their rules. We keep going up by 500k. Each time, the other party counters 25k more. We make our last bid.
Come back tomorrow for the last part in this series.
So now, we sit back and put our thinking caps on. We were told we were the highest offer . they are asking all parties to make a minimum bid of 100k higher than our last offer. We have a few days for discussion. I assume that we need to blow everyone else out of the game and when its time to present our offer we raise our bid $800,000 (note to all, the bids are now in the low to mid 7 figures. I assumed (really hoped) that coming in with the highest bid would close it down. Lesson to all – don’t assume.
Here’s the notification letter:
I am pleased to inform you that your bid of $Y,YYY,YYY for the domain names and trademarks owned by our wholly owned subsidiary, xxxxxxxxxxxx represents one of the three highest bids received as part of xxxxxxxxxxxx’s sale process.
On Monday, beginning at approximately 10:00 a.m., we will be conducting a round robin auction, consisting of individual phone calls to the three remaining participants seeking the highest bid. We will continue the calls until two of the three bidders drop out, leaving the buyer that we will move forward with toward closing.
At the conclusion of the bidding on Monday, we intend to have the winning bidder execute a letter of intent, and immediately wire funds representing 10% of the purchase price to xxxxxxxxxxxx. We intend to structure this transaction as an asset sale, and consideration shall be in cash payable at closing, anticipated to be no later than xxxxxxxx, xx, 2009. I will be distributing the form of the letter of intent and asset purchase agreement over the weekend.
Please note that the Buyer shall rely solely on the revenue data previously supplied as support for any bid, and closing of the transaction shall not be contingent upon the buyer performing any additional due diligence with respect to statistical data related to the domain names.
Thank you again for your participation in this sale process, and I look forward to speaking with you on Monday.
Stay tuned for the auction in part 4
There has been much happening in the domain business this year. Unfortunately, many of the larger deals go unreported.
It’s not the Toys.com auction that this post is about. Earlier this year I was involved in the Toys.com bankruptcy auction. While this was both exciting and frustrating, ANOTHER major auction was going on. It seems that a large company decided to divest its domain portfolio and wanted to do it rather quickly. I found this out about it purely by accident. Their board was meeting the next day to decide and looked like they would approve a low 7 figure offer, which was at a rate of 5 times cash flow. While the cash flow was nice, the names were nicer. I immediately sent an offer, which was higher than the current offer. Since the company was public and the difference was material, I knew that I they would have to consider my offer. See later in the week for part 2.