Stock Watch: Soros Investment Sparks Bluefly

Bluefly, Inc. (Nasdaq: BFLY) tacked on 7/32 to 2 31/32 Friday after the company announced a financing agreement with a partnership controlled by investor George Soros that could raise as much as $25 million.

The deal also gives Soros a controlling stake in Bluefly, an online retailer that sells designer clothes and home furnishings at discounted prices.

Bluefly said it signed a non-binding letter of intent under which Soros Private Equity Partners affiliates may invest up to $15 million in the company, buying $5 million in convertible preferred stock. The company would also begin a $20 million offering giving its public shareholders the right to purchase common shares at $2.34 each. If shareholders purchase less than $20 million, Bluefly said, Soros would make up the difference by buying the rest.

The plan also converts $15 million in debt financing provided by Soros into preferred stock. Soros first purchased a stake in the company last year.

Bluefly, like other e-tailers, has seen its shares fall in value in recent months. A year ago, the stock was trading above 16. Yet the company has arrangements with several high-profile partners, including, Yahoo! and America Online, that give it visibility. The company’s Web site sells items by designers including Prada and Gucci at prices up to 75 percent below retail.

Bluefly, which is based in New York City, lost $5.3 million, or $1.12 per share, in the second quarter, on revenue of $4.33 million. The company said it slashed customer acquisition costs by nearly 70 percent in the quarter, even as it added customers and drew more repeat business.

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