IPOS
You'd think online adult entertainment would be an investor's wet dream, wedding the Internet stock frenzy with the ingredient most Net companies lack - profits. But taking porn public is proving to be a hard sell on Wall Street.
Two online porn purveyors trying to launch IPOs, Internet Entertainment Group (IEG) and Efox.net, have found so far that traditional routes to the market aren't getting them anywhere.
"It'd be a waste of time to approach any of the investment banks," says Joseph Preston, president of Efox, a recent startup. "If Wall Street didn't mind the adult content, IEG would have been public at least a year ago."
To go public, digital skin traders may need to be as creative about financial engineering as they have been with technology. "We're doing a self-underwritten public offering," Preston says. He hopes to raise $7.5 million by offering stock in Efox directly to the public, similar to what Wit Beer did a few years ago. If Preston can get more than 25,000 people to pony up $300 apiece for his shares and find three market makers to sponsor him, he'll qualify for Nasdaq listing and become daytrading fodder.
IEG's Seth Warshavsky has been trying to mount an IPO for more than a year and insists, "We have some good banks lined up." The latest rumor is that IEG, which claims annual sales of more than $50 million, will try an obscure financial end-run known as a reverse merger. Using his cash-engorged sites such as Club Love, Buttsville, and Manhole.com, Warshavsky would buy out a penny stock, take over its Nasdaq symbol, and then fold IEG's operations into the already-listed company. Presto: pubic to public.
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