Theglobe Starts to Crumble

Baldwin Louie — Fri, 03 Aug 2001 18:00:00 -0400

Web portal Theglobe.com, whose twentysomething founders became icons of Internet excess after the company's initial public offering, said Friday that it will close its community business Web site and Web-hosting business within two weeks in order to cut costs.

The company has already laid off 60 employees, nearly half of its staff, as part of the scaling back of its business, the company said in a statement released shortly after the close of stock market trading.

Theglobe.com, whose November 1998 IPO marked the beginning of the Internet frenzy, was highly regarded by investors and analysts as a startup. However, the firm quickly lost its sheen, and its stock – which rose more than 600 percent on its first day of trading to more than $80 – was delisted by the Nasdaq National Market.

Theglobe.com said it is entertaining all offers for what it views as its core strength: its gaming business. The company's gaming properties include Happy Puppy, Kids Domain, Games Domain/Console Domain, Computer Games Online, and Chips and Bits and Computer Games Magazine.

"We are not in a position to sustain our online business operations in the long term and are now aggressively seeking a business combination or asset-sale opportunity that can step in and ultimately capitalize on the highly targeted audience we have amassed through our leading games information properties," CEO Chuck Peck said in the statement.

Also Friday, the company was named in a class-action filed by shareholders alleging that one of its underwriters, Bear Stearns, had received commissions from investors in exchange for getting allocations of the IPO. Representatives of Bear Stearns were not immediately available to comment.

The company will cease operating its community site, Theglobe.com, which allowed users to post their own homepages. It also will shut down its Web-hosting business, WebJump. In addition to the staff cuts, the company has terminated the lease for its New York City headquarters and will relocate to a smaller facility in mid-August.

Repeated phone calls to the company were not returned.

On Nov. 13, 1998, Theglobe.com made Nasdaq history when its IPO opened at $87 and rose 606 percent from the selling price of $9. Two years later, it was trading at just 53 cents.

Theglobe.com's IPO burnished its reputation as the archetypal dot-com success story, embodying youth, eye-popping wealth and boundless enthusiasm. The idea for the online community was hatched in 1994, in the dorm room of two Cornell University students, Todd Krizelman and Stephan Paternot. When the company went public, the twentysomethings became instant multimillionaires and dot-com celebrities.

By the time they stepped down from their positions as co-CEOs in August 2000, they became representative of another characteristic of dot-com mania: criticism that as inexperienced businessmen, they had stayed in the driver's seat too long.

In a November 2000 restructuring effort, Theglobe.com laid off 51 people. On April 10, 2001, an additional 59 employees were let go, and several weeks later, the company announced its delisting from Nasdaq and subsequent move to the OTC bulletin board.

On Friday, the company's shares closed at 13.5 cents.

In February 2000, Krizelman was quoted in the Los Angeles Times as saying, "We continue to march toward ... profitability [by] the end of 2001."

Ah, the dreams of youth.

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Theglobe Starts to Crumble