Business-to-business (B2B) online trading community operator VerticalNet, Inc. has formed a joint European venture with global communications company British Telecommunications (BT) and venture capital fund Internet Capital Group (ICG).
The joint venture, to be known as VerticalNet Europe, is funded with $227 million (US$) in cash and assets from the three partners, including $107 million in cash contributed by BT and ICG. VerticalNet will be the majority shareholder.
In addition to the formation of the European joint venture, VerticalNet and BT have agreed to create a spin-off for the UK, VerticalNet UK Ltd.
On a Worldwide Roll
Despite fierce competition in the B2B trading community, VerticalNet has managed to capture the imagination of Wall Street and a number of well-heeled partners. Earlier this month, for example, a subsidiary of the Japanese venture capital firm Softbank Corp. entered into a joint venture to create VerticalNet Japan Kabushiki Kaisha, which will recreate the VerticalNet formula in Japan.
Several days later, VerticalNet announced that Microsoft would invest $100 million in the company to use its various software products in developing its various trading communities.
Catching Wall Street’s Notice
Wall Street has certainly noticed the VerticalNet phenomenon. The company went public in February 1999, closing at $22.68 per share. Until November 1999, the stock traded in the $30 to $60 range.
In late November, the stock jumped to the $100 range and rose to a close of $164 on December 31, 1999.
The new year has produced even better results. On February 1st, VerticalNet’s stock closed at $252.12 per share after reaching a high of $289.56 several days earlier. On Tuesday, the company announced a two-for-one stock split for shareholders of record on March 17, 2000.
More Information Than Trading
While VerticalNet has made its spectacular rise by positioning itself as sponsoring vertical trading communities, it seems to be a far better provider of information content than trading services.
Nevertheless, with reports from numerous analysts that B2B e-commerce is going to explode worldwide over the next few years, VerticalNet found itself at the right place and time to benefit from a feeding frenzy of both venture capital and stock market investment dollars.
Earlier this month, for example, Henry Blodget, an analyst with Merrill Lynch in New York, said that there are more buyers than there are B2B stocks to be had. “Everyone wants in and there are very few companies you can buy,” he said, “which creates an imbalance of supply and demand.”
The bottom line for VerticalNet is that it now has all of the cash it needs to develop the B2B trading services that will make it a true online trading community. It remains to be seen, however, whether the company, which reported revenues of $20.8 million and a net loss of $32 million in 1999, can attract the audiences required to justify its staggering market capitalization of $8.9 billion.