MVP.COM FUMBLES SPORTSLINE PAYMENT
Byline: Peter Braunstein
NEW YORK — “Win or go home.” It’s a sports culture expression that’s lately become applicable to e-tailers of sports gear and activewear. Just one year ago, Internet start-ups seeking investors could invoke profit almost as an afterthought; now, the slightest perception of faltering profitability can trigger an investor rout.
The latest drama involves sporting goods e-tailer MVP.com, which recently missed an Oct. 1 payment of $5 million owed to its backer Sportsline, even though it had approached Sportsline and other partners for additional financing.
The payment was part of a strategic partnership with Sportsline that requires MVP to pay the company $120 million over a 10-year period. Sportsline president and chief executive officer Mike Levy, in an attempt to mollify investors, announced Thursday, during a company conference call with analysts to review its financial results, that Sportsline would write down its investment in MVP and record a non-cash charge of $100 million.
“To date, our relationship with MVP has been highly accretive to Sportsline’s shareholders,” Levy told the analysts on the call, noting that MVP has paid Sportsline $13 million in cash so far this year. “Had we continued to operate our e-commerce business independently, we estimate we would have lost in the neighborhood of $10 to $15 million this year.” Levy added that Sportsline will attempt to restructure payment terms for the remainder of the 10-year period contingent on MVP receiving fresh funds. “Even if we assume the worst-case scenario and say that MVP is unable to secure financing and our deal with them does not work out, we’re confident that over time we’ll be able to put another deal in place,” he said.
MVP.com would not comment Friday on the missed payment, but a company spokeswoman contended “the renegotiation with Sportsline regarding the 10-year repayment schedule, and the search for additional financing, are completely unrelated.” MVP has been planning to pursue another round of financing since its launch in January, and is now in talks with current backers Benchmark Capital and Freeman-Spogley. MVP also claimed strong sales, particularly in September, but would not specify. “We’re still on track to be cash-positive by fourth quarter 2001,” said the MVP spokeswoman. “In the world of e-commerce there was this irrational exuberance a year ago, which has now been replaced by an equally irrational pessimism. But we’re staying the course.”