The Internet’s fourth-largest online brokerage attracted $195 million (US$) in financing Wednesday, but it was who declined to participate in the financing that carried headlines Friday.
Datek Online confirmed to the E-Commerce Times Friday that Vulcan Ventures, the investment company run by Microsoft co-founder Paul Allen, declined to participate in the equity investment. The company did not offer a reason for Vulcan Ventures withdrawal, which was said to have come at the last minute in the due diligence process.
Instead, it said that [email protected] BV, a Dutch subsidiary of the French company Group Arnault, and Boston-based investment firm TA Associates chipped in with the $195 million investment. The company said the money would be used for new marketing initiatives, technology investments, staff additions and product enhancement.
Both TA Associates and Group Arnault, the company owned by flamboyant French entrepreneur Bernard Arnault, will reportedly gain a seat on the company’s eight-member board and play a role in future strategic partnerships.
Vulcan Withdrawal Hurts Datek
Obtaining $195 million in private equity investment is no small feat, even in the overheated world of e-commerce. However, Vulcan’s withdrawal — which was reportedly in the neighborhood of $100 million — will hurt Datek, in the short-term at least.
Vulcan’s involvement in private equity is being viewed as the Internet equivalent of a papal blessing. Ask Go2Net.com. Allen and Vulcan recently purchased a cumulative $426 million in the company’s stock and the network of business and community-driven sites is now seen as a top-tier player in the industry.
No News is Good News
In addition, Datek is carrying some PR baggage from its past. One would think the company’s porter must be near collapse at this point.
The SEC levied a $50,000 fine against the company in May for allegedly using client’s money to pay expenses. Datek agreed to pay the fine, but didn’t admit any guilt. One week later, the company announced the deal with Vulcan and the two other investors. That announcement apparently put an IPO on hold and the company reportedly has no current plans to file for one.
Datek Online was also reportedly named but not charged in a federal grand jury indictment handed down in Florida last month accusing five people — two of who reportedly have Datek ties — of money laundering and securities fraud.
In a separate matter, the Manhattan District Attorney’s office has yet to release results of an investigation it launched last year into whether Datek was involved in a money-laundering scheme.
On the good news front, the company was recently named by readers of The Street.com as the best online brokerage for the second year in a row.