WENDY STUECK
Monday, October 28, 2002
VANCOUVER -- Glenn Ballman could put it all behind him. He could file the memory of how it felt to briefly float atop the dot-com bubble and move on to other things, such as piloting his vintage airplane and relaxing on the Caribbean island of Nevis, where he's spent most of his time since resigning as chairman and chief executive officer of Onvia.com Inc. in April of last year.
Instead, he wants to use his boom-time bounty to buy back the company he founded, take it private and -- he hopes -- turn a profit for investors. "It's something I wanted to deliver to shareholders," Mr. Ballman says. "I thought they deserved that."
If he succeeds in his quest, he will join a number of technology entrepreneurs who are plowing stock market gains back into sometimes-floundering creations.
Often, founders re-invest because they believe in the technology or services they launched. Fire-sale prices help. American Scott Blum, who founded Buy.com Inc. of Aliso Viejo, Calif., in 1997, sold his controlling interest for more than $100-million (U.S.) in 1999. Last year, he picked up the company for $26-million.
Narendra Rocherolle, co-owner of Redwood City, Calif.-based Webshots,says he and his two partners wanted to save a business they believed could tap the public's growing enthusiasm for finding, swapping and sharing images on-line -- and turn a profit.
In October of 1999, the three sold Webshots to Redwood-based ExciteAtHome Corp. for $82.5-million in stock. Earlier this year, after ExciteAtHome entered bankruptcy proceedings, they bought it back -- for $2.4 million.
"A beach might be nice, but we're outside the bureaucracy of a large corporation and red tape, and it's a lot of fun," he says.
Mr. Ballman sounds similar themes. Onvia.com, he says, should have been profitable by now. He also feels responsible to shareholders, especially those who put money into Onvia.com before it went public. One is an 83-year-old apple grower. Another runs a sports team. Others are insurance agents or shop-owners, people who believed in the concept of an on-line hub where others just like them could buy, barter and sell.
"Those are the important shareholders, the small business people who believed in what I was doing," Mr. Ballman says. To date, their faith has not been rewarded.
Onvia.com's original concept was simple: create an on-line market for small business goods and services. It was founded in Vancouver in 1997, and moved to Seattle in 1998 for better access to venture capital and potential customers.
After raising $71.5-million in venture capital, Onvia.com went public on March 1, 2000, on the Nasdaq Stock Market. Shares opened at $21 (U.S.) and ended the day at $61.50. At its intraday peak of $65.50, Mr. Ballman's 13.5-per-cent stake had a paper value of more than $1-billion (Canadian).
The stock's slide was equally dramatic. By August, shares were trading at about $6 (U.S.), and by the end of 2000, the stock had slipped below the dollar mark.
In subsequent months, Onvia.com cut employees, sold or closed money-losing divisions and zeroed in on the business-to-government market. The company had plenty of cash on hand -- the IPO raised $233.8-million -- but as it shifted gears, revenue plunged, from $147.6-million in 2000 to $17.9-million last year.
Last April, Mr. Ballman resigned as director, chairman and chief executive officer. His replacement was technology veteran Michael Pickett, who had been Onvia.com's chairman since early 1999 and joined the company full time as president and chief operating officer in August, 2000.
On Friday, Onvia.com shares closed at $2.40 on Nasdaq. Mr. Ballman, now 31, says he always intended to hand over day-to-day management of Onvia.com to an experienced manager.
But things have not worked out as he had hoped. He is upset that the company is not yet profitable, and that executives have received generous salaries while it continues to bleed red ink.
According to regulatory filings, Mr. Pickett earned $272,247 last year, including a $37,813 bonus.
The stock came close to being delisted from Nasdaq, but managed to hang on by conducting a one-for-10 reverse stock split in July. Beginning last October, Mr. Ballman began making offers to repurchase the company. He says those offers were rebuffed.
This month, DGR Enterprises Inc.,a Seattle-based company owned by Mr. Ballman, Robert Ayer and David Bell -- both early investors in the firm -- made a public offer to acquire all Onvia.com's shares outstanding at $2.75 each in cash, for a total of about $21-million. Together, the three men now own about 8 per cent of the common stock.
In a prepared statement issued Oct. 21, Mr. Pickett rejected the offer and said Onvia.com's board "views this proposal as the latest in a series of efforts by Glenn Ballman to acquire Onvia for a price substantially below its cash value.
"As with his prior offers, the Onvia board of directors has determined that DGR's current proposal is not in the best interests of Onvia shareholders."
DGR's most recent offer expired Oct. 25, but Mr. Ballman said he will be pursuing other options to acquire the company.
Onvia.com, meanwhile, says it is getting closer to turning a profit.
For the three months ended Sept. 30, the company reported a loss of $3.1-million or 41 cents a share on sales of $1.8-million, compared with a loss of $17.2-million or 84 cents on $838,000 a year earlier.
But Mr. Ballman says Onvia.com continues to squander its resources. It even paid out a dividend last March, a move the company said reflected its changed business model and generous cash reserves. Mr. Ballman sees it, rather, as an attempt to mollify shareholders. He says Onvia.com needs to cut the hefty salaries, fold its tent as a public company and focus on customers.
Speaking on the telephone from Nevis, he laughs when asked if bonuses would be available to managers who failed to reach strategic goals.
"Are you kidding me? No way. You have to show people the door if they don't hit their numbers. You have to go at it like you are a blue-chip company."
On Friday, Onvia.com shares closed at $2.40 on Nasdaq.
