Banks.com one of the stocks in our domain parking stock index took a huge hit today down 29% to $.17 a share.
The company which was trading over $1 a share in March, disclosed on July 7th that it was in default of a certain “Investment Agreement” in the aggregate principal amount of $7.0 million which could cause them to lose their prized domain name IRS.com
According to the SEC filing:
“””Upon the Company’s failure to meet its payment obligations, or the failure to comply with any affirmative or negative covenant, or should any other situation arise which constitutes an “Event of Default” under the Investment Agreement, Investors holding at least 51% of the Notes can elect, among other things, to accelerate the Company’s indebtedness under the Notes, or to take possession of, sell, lease, or otherwise dispose of any of the Company’s assets including its IRS.com domain name and website, that were pledged as collateral for the Notes. While an Event of Default exists, such Investors may also require the Company to pay interest on the Notes at a rate per annum that is 4% greater than the rate of interest otherwise then in effect for the Notes.
As of March 31, 2008, the Company was not in compliance with the financial covenants contained in the Investment Agreement.
On May 9, 2008, the Company received from the Investors a waiver of its obligation to comply with these financial covenants through June 30, 2008
If the Company does not regain compliance with these financial covenants by September 30, 2008, Investors holding at least 51% of the Notes have the right to take any of the actions described above, including, without limitation, declaring the Notes immediately due and payable.
As of June 30, 2008, the Company had outstanding principal and interest in the amount of approximately $6.8 million under the Notes.
The Company is currently in discussions with the Investors to obtain an amendment to its Investment Agreement to waive compliance with its financial covenants as of September 30, 2008 and to establish new financial covenants for future periods.
The Company can offer no assurances that it will be able to negotiate an amendment with the Investors.
If the holders of the Notes declare the Notes immediately due and payable or seek to foreclose on any of the Company’s assets, it would raise substantial doubt about its ability to continue as a going concern.
Interesting – thanks for that info
Mike–what do you think IRS.com’d sell for? 1 mill? 2? 5? More?
I’d say 2-3 mill.
What does everyone else think?
Steve
Tough call because of the possibility of US governmental action outlawing the us of a domain which can be confusing to a governmental agency.
The Snowe Bill made this a crime.
I expect another run be made at attacking such domains and this is number one on the hit list.
Without that threat the domain is worth several million and think it make pretty good money.
With the legal threat it may only pull 1M-3M
Man, we are on the same wave length. I just researched Banks.com last night for a new article and saw it had dropped so much.
Here’ s the deal with IRS.com. The company is rumored to have paid around $10M for it. Their lawyers wrote a briefing as to why the IRS couldn’t/wouldn’t lay a claim on it, but I think that has changed. After all, they’ve forwarded the domain to their main site now and it doesn’t have the IRS branding. It’s surely lost a lot of revenue from that. My guess is they’re under pressure on it.
Andrew
There are a lot of stories about congressman and other officials unhappy with people being confused with IRS.com and .gov.
In my opinion there is at least a 50% chance that some legislation will be passed in the next 3 years that would cause this domain’s use to be greatly restricted.
Mike,
On a tangent here but How does someone buy shares in Dark Blue Sea. My broker is Scottrade and they don’t deal with Australian stocks. Do you know who does?
Tony, you can buy it on the Pink Sheets in the U.S. I think they are depository receipts or something. Do a search on yahoo finance for “dark blue sea”
Tony
I am told by someone who owns the Australian shares that you can get them using a Charles Schwab account
Thanks, Mike and Andrew.
How does the Banks.com business model work? I see that they get tons of traffic, but no way it is type-in!
They never show up anywhere on Google either.. Any ideas?
Wow!
Offline Banks and online “Banks” in trouble.
Where will it end?
Patrick
Blackshore
I have no idea.
Their main asset and money maker is IRS.com which now points to nothing that will make money.
Very great article! thank you for giving this information, I need your help every time with the help your article.
FYI, here’s why Marchex was down frickin’ 20% or so yesterday:
http://www.mffais.com/newsarticles/2008-07-17/2469318-124266.html
Andrew
I saw that but the stock was up like a $1 in after hours trading and back up some more today.