Publicly traded DSL.net Inc., a national provider of high-speed Internet access, has sold $6 million worth of preferred stock to VantagePoint Venture Partners. In a Schedule 13-D filed with the Securities & Exchange Commission, San Bruno, Calif.-based VantagePoint said it had completed the initial $6 million purchase with an option to buy an additional $14 million, and is now permitted to appoint a majority of the members to DSL.net’s board of directors.
Assuming VantagePoint purchases the additional $14 million of convertible preferred stock from DSL, the venture firm could convert the shares for upwards of 111 million shares of DSL.net stock, according to the filing.
The much-needed sale comes after Nasdaq exempted DSL.net from stockholder approval requirements. DSL.net requested an exception because the New Haven, Conn.-based company believed that any delays associated with securing stockholder approval could have seriously jeopardized its financial viability.
“I applaud Nasdaq’s decision as it allows us to forge ahead unencumbered by any unnecessary delays. I remain steadfast in my belief that this investment in the future of DSL.net is in the best interest of our stockholders and the company,” said David Struwas, DSL.net’s chief executive. “The completion of this financing will enable DSL.net to focus on pursuing growth and providing quality Internet solutions.”
Perhaps the company’s economic health could have been further damaged by a delay of the transaction, but that hardly seems likely.
As of last Thursday, the three-year-old DSL.net was trading at a mere $0.57.
After completing five private rounds and receiving an impressive valuation of $408 million in July of 1999, the Internet access provider hit the public markets in October of that year. Its first day on Wall Street, the stock closed at $8.50. When the Internet boom was in full throttle, DSL.net hit an all-time high of $31 per share. However, its stock has since plummeted, and has been trading at below a dollar for almost six months.
The company has blamed its financial woes on the poor economic environment and the public’s resistance to Internet-related products.
However, last quarter, DSL.net managed to slightly stem the tide of red ink flowing from its balance sheet. Its net loss was $10.4 million, which is an improvement from the $24.9 million loss it suffered during the same period a year earlier. Additionally, the company’s third-quarter revenue reached $11.7 million, more than double the $5.7 million it had recorded in the third quarter of 2000.
When the news hit the markets, DSL.net’s stock price shot up 33%, to $0.68 a share.
The company’s investors include Focus Ventures, Microsoft Corp., Oak Investment Partners, Prism Venture Partners, Staples Inc. and VantagePoint Venture Partners, which has been a DSL.net backer since day one.
VantagePoint is a private investment firm with more than $2.5 billion under management.
Danielle Fugazy can be contacted at:Danielle.Fugazy@tfn.com