When Spanish bank Banco Santander Central Hispano (BSCH) bought a 75% stake in online financial services company Patagon.com International Ltd. last spring for $529 million, all signs pointed to an almost-immediate initial public offering. In fact, one overzealous bank official even went so far as to officially confirm such suspicionsThat was then. Less than a year later, not only did Miami-based Patagon.com not price last year, but BSCH recently reversed its own course by announcing that an offering was not even in the cards for 2001.
At the time of the sale, Patagon had already received $58 million in venture funding, $53 million in December, 1999, in a round led by still-separate Chase Capital Partners and J.P. Morgan. Additional participants included Capital Riesgo Internet Ltd., a venture unit of BSCH, Goldman Sachs Asset Management, GE Capital Equity Group, GP Investimentos of Sao Paulo, and Quantum Dolphin PLC., New York, a hedge fund associated with George Soros.
BSCH cited the IT market decline generally, and Patagon?s position in particular, as reasons to hold off on the IPO, as the company?s valuation has plummeted since BSCH acquired the company in March, when Patagon was valued at $678 million.
Entrepreneur Wenceslao Casares created Patagon in Buenos Aires in 1998. It received $1 million, its first venture funding, from Argentine angel investor Zsolt Agardy late the same year. Chase Capital Partners and Flatiron Partners LLC invested $4 million in early 1999, and another $4 million mid-year through a bridge loan.
Patagon operates country specific sites for Argentina, Brazil, Mexico, Venezuela and Chile. It distributes an array of financial services, including financial information, online payment options and stock trading. When BSCH acquired its 75% stake, it said Patagon would be its exclusive online brand in Latin America and Europe. The company still intends to expand into Italy, Germany, France, Portugal and the U.K. In order to do so without an IPO, however, BSCH may need to seek out a new partner or other financing options.
At Least It?s Still Open
In related news, Latin America is proving unable to stem to flow of dotcom closures which have become commonplace in the U.S. In Brazil, online insurance provider Webseg, online auctioneer Gibraltar and e-education firm Patavina have all officially tanked. Each company was backed by Brazilian Internet incubator Ideasnet, which had itself been the first Internet firm to trade on the Brazilian stock exchange.
Moreover, a trio of free Internet sites — Gratis1, Super11net and Netgratuita — have also failed. Peers BR Free, Cidade Internet and iG remain, but are seeking to bring in revenues through fee-based services.
In a just-released market survey from Brazilian Web site Investnews, 41% of the 182 respondants claimed the primary reason for the multiple failures is simply a case of multiple strategic mistakes. Webseg, for example, overestimated the strength of the insurance sector and failed to partner with a bricks-and-mortar player.
Another 25% cited overly high expectations as the culprit; 19% listed insufficient financial returns as the reason; and 9% chalked up the failures to market saturation.
H.M. Werner can be contacted at Story Feedback.