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#TBT Irrational exuberance, dot.com to dot.gone

Derek Watson
Derek Watson

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Dot Com to Dot gone

Stephan Paternot and Todd Krizelman met at Cornell University in the early 90s. Chatrooms were becoming commonplace on college campuses, and they saw the chatroom as more than just a place for social interaction but as a huge business opportunity.

 

In December of 1994 the two raised  $15,000 and launched WebGenesis, a programming company. On April 1st ‘95, they launched theGlobe.com, a portal for online clubs and chatrooms. 

In the first month the site had 44,000 visitors and the company had grown to 17 staff.

In 1997, the company raised capital, Dancing Bear Investments invested $20 million for 48,303,148 shares at $2.415 per share. Its founder, Michael S. Egan, became the CEO. It also raised money from David Horowitz, former CEO of MTV, Bob Halperin, Vice Chairman of Raychem and David Duffeld, the CEO of Peoplesoft.  The investment gave the two 23-year olds salaries of over $100,000 each and $500,000 each for the sale of some shares.

It was the beginning of the dot-com bubble years and on Friday, November 13, 1998 the Globe.com IPO’d. It was the 48th IPO in the internet space that year,  basically the peak of the dot-com bubble.

 

Lead underwriters Bear Stearns and Volpe Brown Whelan managed the IPO, good for insiders, good for them, but bad for the owners and the street. Bear Stearns and Volpe Brown Whelan split over $1,778,000 in fees. Shares were allocated at $9 a share to friends and family such as Miami Dolphins coach Jimmy Johnson and his girlfriend Rhonda Rookmaaker received 2,000 shares apiece, Dolphins owner H. Wayne Huizenga was a TGLO director and important clients of Bear Stearns and Volpe Brown Whelan.

 

The stock opened at $90 and went up to a price of $97 before falling back to close at  $63.50 per share. Rhonda Rookmaaker and Jimmy Johnson sold out at $87 per share, a massive 10x gain and some Bear Stearns and Volpe Brown Whelan clients also made a one day gain of 1,000%. 

The stock’s 606% first day increase is still the record holder, over 15 years later.  3.1 million shares were traded that day, for a total of $27.9 million.  The company’s market capitalization value was over $840 million making Paternot and Krizelman each worth over $100 million (on paper).

Unfortunately for the 93 staff of theglobe.com they were required to wait six months before selling.

 

 

By Nov 99 the stock was at $10 and in 2000, with the stock at 50 cents, Paternot and Krizelman were forced to resign from the company by August 2001 the company’s market capitalization was barely $4 million.

Co-president and CEOs of TheGlobe.com Stephan Paternot, left, and Todd V. Krizelman in 1999. Photograph by Brian Killigrew/Bloomberg

After the wild ride of theglobe.com both Todd Krizelman and Stephan Paternot went on to start successful internet based companies.

 

Todd Krizelman is the founder and CEO of MediaRadar a Sales Enablement & Intelligence company specific to Ad Tech

Stephan Paternot is the co-founder & CEO of Slated, the world’s first online film finance marketplace.

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