Monday, January 8, 2001		Article

Letsbuyit.com faces rough weather
By Julia Snoddy

The gloom over the UK dot.com world deepened further last week when another high-profile Internet company plunged into trouble.

Letsbuyit.com, best known for its advertising campaign featuring ants supposedly illustrating strength in numbers, sought and won court protection from its creditors after running into financial difficulties.

The company, which specialises in arranging for consumers to pool their buying and bargaining power for goods, had applied to a Dutch court to delay making repayments on its debts while it sought extra Pounds sterling 50 m (US $ 72 m) of funding.

The company’s Web site had given no indication that anything was amiss, but a spokesman said it would be closing to new orders in the near future. Existing customers would receive their goods or a full refund.

 Martin Coles, the chief executive said: "While we still have cash and strong sales growth, we don’t have any prospects of receiving funding in the short term, so we felt it was prudent to take this stand." The group, whose holding company is Dutch but whose Web site is based in London, is the latest in a series of online ventures to run into trouble in a sector that is seeing about one dot.com business go under every day. Breathe.com and thestreet.co.uk closed their doors last month. On top of that, ready2shop scaled back its ambitions for its Web site after failing to attract enough venture capital. The industry has been hit by falling share prices and the high costs of winning customers.

The problems at Letsbuyit came to a head when it asked for trading in its shares to be halted in Frankfurt after announcing the plan to delay debt repayments.

Stephen Cox, a spokesman for the company, had said an early rescue deal was not in sight. "We’re talking to people but it takes time for these deals to conclude. There is no expectation that a deal will be done quickly."

Analysts said Letsbuyit’s move was a strategic plan to extend its life. The deferral of debt repayments would allow the company to use its cash for other priorities and to increase the amount of time it has to operate. "It’s not a good sign if a company can’t meet its debt repayments. It suggests it has severe cash restraints," one said.

Last month the company said it was looking for a partner to provide funding until it reached profitability at the end of 2002, but said it has enough cash, Pounds sterling 48m ($ 70 m), to take it to the middle of the next year.

Mr Coles said last month: "We definitely will be looking for cash, we’re talking to people right now about the potential for investment. We’d be looking around US $ 72 m mark." The company’s cash pile has dwindled since it went public in July, when it raised half the amount it was hoping for. The flotation had been postponed twice because of negative market sentiment on technology stocks. It said it was not possible to say how much money it had left at this stage.

— By arrangement with The Guardian