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A little more than a year ago, Nathan A. Chapman Jr. was reeling from a dismal initial public offering for his eChapman (No. 12 on the 2001 BE INVESTMENT BANKS list with $4.31 billion in total issues) group of financial and online companies (see “The Perils of Going Public,” April 2001). The group had raised $16.4 million when it debuted on the Nasdaq on June 20, 2000, but went through nearly all the money buying back shares in an attempt to lift its sinking stock price, according to newspaper reports.
Undaunted by the most recent setback–a second-quarter loss of $544,000–in August, the Baltimore-based company bought the portal of NetNoir.com, an African American Website that offers lifestyle, health and fitness, career, and entertainment news, as well as shopping via Blackshopping.com.
Under the terms of the deal, said Sabrina Warren Bush, senior vice president of strategic partnerships at eChapman, the company acquired NetNoir’s Internet portal for $400,000 in cash and stock. “We didn’t actually acquire the NetNoir company,” Bush explained. “The Internet portal was an asset of the company. We acquired that portion. The Internet portal was, for us, where the core value lay.”
Bush insists that taking on San Francisco-based NetNoir is in eChapman’s best interest, despite the fact that eChapman lost $4.48 million last year and now trades at around $2.05 a share, down 72% from $7.37–its IPO price last year.
That’s because, she explained, acquiring NetNoir.com shows eChapman’s shareholders tangible steps that the company is taking to improve its operating income. “Our board always wants better results,” Bush said. “Welcome to being a public company.”
Bush said eChapman has no plans to rename NetNoir or shift the company’s focus away from catering to African Americans, particularly since that is in line with eChapman’s current strategy of offering products and services to women and minorities over the Internet. “We always knew that an increased channel on the Internet would be important for the continued growth of eChapman,” she said.
“NetNoir.com is our first Internet-related acquisition,” Bush said. “We’re going to be looking at other opportunities,” she added, but wouldn’t elaborate.
This was a good move for NetNoir for several reasons, says Melody Cunningham, former CEO at NetNoir and current CEO of the Chapman Network. Under this division, Cunningham is responsible for content, management, and development of all eChapman Websites. “We were struggling like every other Internet company, and being acquired by eChapman kept us afloat,” she says.
Acquiring NetNoir marks the latest move this year by eChapman to reverse its slumping finances. It also streamlined its advertising and marketing budget.
The changes seem to be paying off, according to Bush. EChapman’s $544,000 second-quarter loss was significantly less than the $913,000 loss in the same period last year. And the company actually posted a $76,000 increase in operating income, excluding merger-related amortization and nonrecurring adjustments, compared to a loss from operations of $1.3 million for the prior comparable quarter.
Nathan Chapman formed eChapman in May 1999 by merging his flagship brokerage house, The Chapman Co., with his investment advisory and