PlanetOut (LGBT) is in a desperate hunt for cash. The company, which operates web sites, magazines and travel services for the gay and lesbian community, has fallen into financial peril. As I’ve noted in a recent series of posts, the company’s stock is in free fall, battered by disappointing financial results and a growing cash crisis.
The company has hired Allen & Co. to consider strategic alternatives; the company is considering selling equity, borrowing more cash or selling all of some of its operations. In a 10-Q filing with the SEC earlier this month, the company disclosed that it promised its primary lender, Orix Venture Finance, to raise at least $15.0 million in new equity or subordinated debt - $7 million by June 30 and the rest by August 31. The company owes Orix $9.7 million; in total it has $16.8 million in borrowings.
In an interview Monday, PlanetOut CFO Dan Miller said the deep slide of the company’s stock - the shares are off more than 31% in the last two trading days - likely reflects sales by 1 or more of the company’s largest shareholders, rather than any specific new developments in its financial situation. It also may reflect the anticipated massive dilution from a capital raise of the size it has promised to seek.
Miller says the company is “moving as quickly as we can” to solve its financial issues.
If it can’t find a way to raise additional funds, he says, PlanetOut “would be forced to approach the lender and work with them on what is best for all parties.” One possibility is that they would trigger a default on the debt.
With the ongoing slide in the stock - on Monday, PlanetOut shares fell 17 cents to 98 cents - the company’s market cap is down to a paltry $17.3 million. Miller notes that the company’s Gay.com URL is “incredibly valuable.” That may be true; what’s not clear is whether the company can raise enough cash to avoid having the site and the rest of PlanetOut’s assets sold off in a Chapter 11 fire sale.
LGBT 1-yr chart: