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Liquid Audio: Better off dead? 172

Posted by chrisd from the well-yeah dept.
mgeneral writes "It seems so for the shareholders. Liquid Audio, had only $150,000 in revenue but managed to lose $5.6 million last quarter. Its main asset: A pile of cash. In fact, so much cash, that if they close the doors, they could pay back the shareholders more per share than the current stockprice...and thats exactly what some investors want them to do." We've run stories on Liquid Audio before...
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Liquid Audio: Better off dead? More

Liquid Audio: Better off dead?

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  • Just having a big pile of cash is a wast. Why don't they just invest in something? At least they'd make a profit of that....
    • Something tells me they don't keep it in the office safe. Most of it would be invested in short term easily convertable assets. (bank accounts, T-bills)
      • Yes. "Cash" in business-speak means any easily liquefiable investments, usually short-term stuff like commercial paper or even long-term stuff which is easy to liquidate like T-bills. It doesn't mean greenbacks, and most of it usually isn't kept in bank accounts either.
      • Most of it would be invested in short term easily convertable assets. (bank accounts, T-bills)

        Liquid Audio has USD 81 mn in cash and equivalents as at 30 June 2002. We should see significant financial income in the Income Statement for the period, but there is only USD 318,000 "Interest and Other Income (net)", which is about 0.4% of USD 81 mn, a funny little return on the cash reserves of the company, even at today's interest rates.

        So it looks like the boss is not doing a good job even of money management.

        On the other hand, it looks like Liquid Audio IS preparing to give back USD 30 mn cash to its shareholders - their merger agreement with Alliance Entertainment has been amended (15 July 2002) to include this cash return. Check out: http://biz.yahoo.com/bw/020814/140345_1.html

  • Liquid Audio should die (Score:4, Insightful)

    by locarecords.com ( 601843 ) <davidNO@SPAMlocarecords.com> on Monday August 26, 2002 @06:25AM (#4139989) Homepage Journal

    Seems to me time for Liquid Audio to die. There is no point throwing good money after bad and the shareholders can then invest in something new (if they aren't too scared off the Stockmarket ;-)

    But then turkeys don't vote for Christmas and I'm sure that managers won't vote to sack themselves...

    www.locarecords.com

  • They still exist? (Score:5, Interesting)

    by saihung ( 19097 ) on Monday August 26, 2002 @06:26AM (#4139990)
    It would be refreshing to see the directors of a company admit that they have no idea how they can make any money and return whatever their investors ponied up. The shareholders own the company, and if there's not even a glimmer of hope of the company ever being profitable (with Liquid I'm not sure that there ever was, but that's a separate issue) then the best thing is to admit defeat, cut your losses while there's still anything to cut, and close your doors.

    • Re:They still exist? (Score:3, Interesting)

      by forgoil ( 104808 )
      That money could in turn be invested in a new company with a better chance of turning in a profit. There are tons of inventions and ideas out there that need investment that by far outshines trying to make money on the internet or with software nobody is willing to pay for anyway.

      What the world needs is a new boom, like the .COM one, just this time in companies that got a clue what the hell they do.

    • Re:They still exist? (Score:4, Interesting)

      by squaretorus ( 459130 ) on Monday August 26, 2002 @08:45AM (#4140245) Homepage Journal
      Wrong.

      The best thing is to find a new board of directors WHO HAVE A CLUE!

      Take easyJet. One of the most profitable and successful companies to come out of the internet age. All tickets booked online, along with some other innovations, allowed far cheaper seats, leading to a massive chunk of market share, even buying Go recently (Go was the British Airways budget airline).

      Stelios, the guy that set up easyJet, has left his position at the head of the company and will completely leave next year. EasyJet has brought in a team and a headman who know how to RUN a business, not just START IT UP. Stelios is off to start another business, easyJet is on its way to another successful year.

      With that kind of cash reserve, even with no IPR, facilities, or brand, you simply need an ambitious board with some GOOD ideas and the capability to pull it off.

      Then the shareholders should get much more than $1 for every $.7 in return. Easier said than done of course.

      • Re:They still exist? (Score:3, Insightful)

        by nathanm ( 12287 )
        With that kind of cash reserve, even with no IPR, facilities, or brand, you simply need an ambitious board with some GOOD ideas and the capability to pull it off.
        This implies Liquid Audio has a somewhat viable business model, which it doesn't. The shareholders are voting on a proposed merger with Alliance Entertainment soon. Without the merger, Liquid Audio will just keep burning through their cash reserve until it's completely gone.

        They have a duty to shareholders to maximize their investments. The best way to accomplish that at this point is to pay off their debts, cash out, and dissolve the company. If they want to radically change their business model, start up a new company and find new investors and capital.
        • Guess what one of the GOOD IDEAS would be??

          Thats right!

          A workable business model. Businesses switch model every five minutes. To say that they should stop and start to change their model is naive in the extreme!
          • Businesses switch model every five minutes. To say that they should stop and start to change their model is naive in the extreme!
            If they could leverage some of their existing technology and only slightly change their business model, fine, but the very core foundation of their company is worthless today. Only a completely new and novel business model could possibly save them. Then it would be Liquid Audio in name only, and not what the investors had in mind when they put up their money. In this case, Liquid Audio has a duty to liquidate (no pun intended) their assets and reimburse the shareholders.
            • In this case, Liquid Audio has a duty to liquidate (no pun intended) their assets and reimburse the shareholders

              Where is that written in stone, other than in your mind? As someone who has operated his own business for the past 6 years I have switched models 3 times, in order to capitalise on changing markets, and to minimise the damage of competitors massively undercutting us.

              If you look at what we started out doing, and what we do now, there is a link - but the model and technology is utterly changed. My backers have been happy to change, indeed they saw it as my duty to come up with a way to change or they would have replaced me! Certainly I have replaced people who didn't keep us competitive, it's still the same company because the objectives of my backers are unchanged - MAKE MONEY!

              If Liquid Audio can MAKE MONEY it is fulfilling its obligations to the shareholders. Period. They dont care how, just make money. Why do you think Monsanto is such a popular investment? Hardly because of their ethical policy!
              • Where is that written in stone, other than in your mind? As someone who has operated his own business for the past 6 years I have switched models 3 times, in order to capitalise on changing markets, and to minimise the damage of competitors massively undercutting us.
                Is your business private or public? If public (i.e. listed for trading on a public stock exchange), there are a whole lot more laws, regulations, and obligations to both the SEC and your shareholders.

                If you look at what we started out doing, and what we do now, there is a link - but the model and technology is utterly changed.
                If Liquid Audio ever had one iota of success, and was just expanding into other, albeit related, markets, it might be feasible. Unfortunately, they've never generated any significant revenue and could never even dream of profitability.

                If Liquid Audio can MAKE MONEY it is fulfilling its obligations to the shareholders. Period. They dont care how, just make money.
                That's my point exactly. The decision isn't even up to Liquid Audio. I think their shareholders are going to vote nea on the merger, then hopefully demand liquidation. At the rate they've been burning through cash, they've got only got a few quarters before their only option is to declare bankruptcy and not return a dime of their shareholders' investments.
      • People have cottoned on to the fact that web businesses are just thin-air scams, even if the people involved are still conning themselves.
    • 'corner taking'(i'm not sure of the proper term in english maybe hostile takeover&axing is better.)

      they could still make a new product with all the cash they got, like WHO SAYS THERE CAN BE ONLY ONE PRODUCT A COMPANY CAN DO??? surely they could start doing something else, like they're not on verge of bankrupty either..

      i could bet the one's on favor of axing are the one's who would get more per stock than they paid..
      • forgot to add that, short term shareholder value isn't everything, that kinda thinking leads to 'americas disease'..(enron&pals)

      • Re:They still exist? (Score:2, Insightful)

        by Rich0 ( 548339 )
        The point is that the company is owned by the shareholders. Sure, in theory they could change their business model and start selling cars instead, but if I were a shareholder I'd rather have the company give me what they can, and invest that in Ford if I wanted to own part of a car company, rather than pay programmers to make cars.

        The shareholders own a company - plain and simple. It is in their best interest to serve customers to get them to buy product, and that is the only way they will ever make money from their shares. However, they did not buy shares as an act of charity - they expect a profit. If they want to help the poor of the world they should dissolve the company and vote to give the leftover cash to some needy cause - not just blead the company into bankruptcy.

    • http://www.funkybusiness.com/inside/funkytimes.htm l#epilogue

      Talent makes capital dance: an epilogue

      Some of you may have heard about it already, but it's worth repeating. Lars Ramquist, head of the board of directors at Skandia, the highly successful Swedish insurance company (well a bit more than insurance company actually - is there really an insurance industry?), recently got a phone call. The guy on the other end of the line was Jan Karendi who runs Skandia's US operations. The conversation may have gone something like this:

      - Hi it's Jan.
      - Hello Jan, how are you?
      - Fine, and the company is doing great too. How are things back home?
      - You know - the weather and the politicians and so on... So, why are you calling?
      - Hmm, let me cut to the chase. I had a meeting with our top people here last week and... well, they told me that they want eight percent of the company.
      - WHAT!!!
      - Is there something wrong with the line?
      - WHAT DID YOU SAY!!!
      - They want eight percent of the company. I want you to tell the stockholders that they will have to hand over eight percent of ownership to our top people, otherwise they are threatening to leave...
      - ...

      Of course, Skandia's stockholders started twisting and turning, whining and screaming like babies without their comforters. And darn it, they will probably succeed - they will win. The top people at Skandia will most certainly not get more than 6,4 or 7,2 (tops) percent of the company. But, we have a hypothesis. In two or three years time, Mr. Ramquist will get another phone call. This time, the employees are going to demand 12 percent or even 14 percent. What will he do then? What will the stockholders say?

      Skandia is not alone. Indeed, the list of companies having to realize that power now belongs to their people is getting longer by the minute. At Nokia, the estimated costs of the stock-option program is more than 10 billion dollars. Robin Hood is not dead. This time though, he's not stealing from the rich to give to the poor. Now, money flows directly from the capital investors right down into the pockets of the intellectual investors. Because in an age where competitive advantages weigh no more and no less than the dreams of a little butterfly - there is only one thing that makes capital dance: TALENT. You can either reward talent accordingly and watch the capital dance or commit commercial suicide (slowly). Listen up CWIs (Capitalists Without Ideas) of the Funky Village: there is no alternative.
      • Now, money flows directly from the capital investors right down into the pockets of the intellectual investors.

        Until the capital investors get sick and tired of pissing their money away on companies where the top people are more concerned about lining their pockets than operating the company.

        The Enrons, JDS Uniphases, etc., have waken up a lot of people. They're pissed that the corrupt assholes at the top of the chain lined their own pockets with gold, and ignored the health of the company.

        There's gonna be one sure outcome of that: companies that over-reward their top dogs will see investors flee.
      • There is some indication that talent is overrated [gladwell.com].

    • It would be refreshing to see the directors of a company admit that they have no idea how they can make any money and return whatever their investors ponied up.

      I doubt they could return that much to the investors. The article says they can pay them more than what the stock is currently worth, but I imagine most of their long-term investors paid much more than that.
    • lets be honest directors want to drag this out till there isn't one sent left

      As they want to suck out their cut from every cent spent.

  • GPL ? (Score:3, Interesting)

    by Lorens ( 597774 ) on Monday August 26, 2002 @06:26AM (#4139991) Journal

    Now there's a dotcom the other way around!

    Now, if they decide to stop and give back the money, will they release the code as GPL?
    • If the source can be sold for profit (even a small one) to another software company (or idividual) it is an asset as any other and will be sold and the cash divided between the shareholders with the rest of the cash.

      Of cource you can buy the source and then relase it as GPL yourself :-)

    • Don't you think that if they had *anything* of value that the stockholders wouldn't want to fold the company? Don't you think that code that they could sell as a product would be of great value to them? If they can't sell it, what makes you think that it would have any value under the GPL?

    • Now, if they decide to stop and give back the money, will they release the code as GPL?

      If I remember correctly, the Liquid Audio codec was an implementation of the MPEG-2/MPEG-4 AAC codec developed by Fraunhofer. Unlike the company that makes RTLinux, I don't think Fraunhofer will easily cough up a license to use its patents for software licensed under the GNU GPL.

  • Fairly common... (Score:3, Insightful)

    by Duncan3 ( 10537 ) on Monday August 26, 2002 @06:26AM (#4139992) Homepage
    This is by no means a rare situation for publicly traded companies to be in when they have a nasty burn rate.

    If the company stays in business, they will soon be worth less, so having a cheap stock price is completely reasonable.

    The problem is the people that paid more for the stock refuse to admit the company has a stupid business model and won't give up till the cash is completely gone - which is also very common (the entire dot-com industry for example).

  • The Arguement (Score:5, Insightful)

    by evilviper ( 135110 ) on Monday August 26, 2002 @06:26AM (#4139993) Journal
    The argument is that the business isn't going to work because there are too many competitors who do what Liquid Audio does but do it for free.


    "Their business model doesn't work."


    So, umm... Why did they invest in the company in the first place?
    • ..."it seemed like a good idea at the time!"
    • So, umm... Why did they invest in the company in the first place?

      As an asset play, of course! That is a workable strategy, assuming you can get a majority of stockholders to force dissolution before the company eats everything up with salaries, advertising, etc.
    • So, umm... Why did they invest in the company in the first place?
      To make a buck, of course. That's the only reason anybody buys stock. It's just the these stockholders see liquidating the company as a more likely way to make a profit than trying to fix the company.

      This is an extreme case, but this problem is not unusual. Publically-held companies are always jumping through hoops to make their stockholders happy, and more often than not that means doing things that actually work against the long term growth of the company. Or, in this case, the short term growth!

  • This is rare.... (Score:2, Informative)

    by Nakago4 ( 576970 )
    a company that has the chance to close its doors and distribute a profit, or try to merge with another company and become yet another hybrid company that will be quickly forgotten. I would think that the obvious choice would be to just dissolve the company and take the profit. They really don't offer anything unique to the market that is worth building a business on.

    • Re:This is rare.... (Score:2, Insightful)

      by bokketies ( 584972 )
      They really don't offer anything unique to the market that is worth building a business on.

      So does the grocery shop around the corner. Yet it provides a living for the guy that owns the place. He won't get rich, but he survives.

      If only firms were allowed to participate in the economy that provide "anything unique", the whole market would be one giant monopoly.

      In fact your answer is so extremely conservative I am convinced this is a signal that the bear market is finally over.

      • So does the grocery shop around the corner. Yet it provides a living for the guy that owns the place. He won't get rich, but he survives.

        The difference is that the grocery store still makes a profit for its owner, even if he doesn't get rich. If he were depleting his retirement savings by spending $38 running the store for every dollar it brought in, he'd be an idiot, even if the store were providing a living for a couple of people he hired.

        Liquid Audio is providing a living for a few people, but it is doing so by wasting money that the shareholders rightfully own, providing no net benefit to society, and if the shareholders have any sense they'll liquidate the company.

  • Shareholders... (Score:3, Funny)

    by AntipodesTroll ( 552543 ) on Monday August 26, 2002 @06:30AM (#4139998) Homepage
    There are two extremes to shareholders. Some want to play fair and simply have a stable investment that pays some dividends regularly.

    Then there are the buy-sell-buy-sell-buy-sell idiots who just want to Make Money Fast and try to get rich quick.

    For real sense to prevail (LA's assets are, uh, liquefied :) another type of investor needs to prevail. One that realises they are a Fucked Company, and that the shareholders are better off getting their money back. (Even if it means they need to then start the investment procedure over again with their regained capital.) Unfortunatly, investors in general arent the best at educating themselves about the tech stocks they own, as history has shown.

  • The scoop (Score:1, Insightful)

    by coryboehne ( 244614 )
    The real problem is the fact that some of the shareholders are asking to be paid quite a bit more for their stock than they invested in it. Seems fair right?

    Wrong.

    Even though this company has enough money to do that, it's not their legal responsibility to make sure that the stock holders turn a profit, hell, it's not even their legal responsibility to turn a profit. Effectively if they give away all the money there is no company left. The company is entering into a merger that should hopefully bring stock values up, which will benefit investors in the long run. These people are just being overly aggressive towards the company, and trying to avoid the risk which is inherent in the stocks and bonds game.

    • Re:The scoop (Score:5, Insightful)

      by JanneM ( 7445 ) on Monday August 26, 2002 @06:54AM (#4140040) Homepage
      For a public company, their responsibility is to make their owners/investors happy, and those are the stockholders. If the stockholders determine they want a profit, that's what the board is obliged to do. If the stockholders only priority is to have all company assets painted light blue, the board will hire painters. The stockholders can force a stockholder meeting (or simply wait until the yearly regular one), and vote to kill off the company and divide up the assets. They could also vote away the board of directors, realign the company as a healing-crystal business or whatever.

      If a majority of votes (where the needed majority is regulated in the company charter) decides it is better to just throw in the towel than to continue, that's what will happen.

      /Janne

      • For a public company, their responsibility is to make their owners/investors happy, and those are the stockholders

        Maybe the major shareholders _are_ management. This is not unusual.

      • Re:The scoop (Score:4, Funny)

        by mbourgon ( 186257 ) on Monday August 26, 2002 @08:37AM (#4140224) Homepage
        In related news, Microsoft has decided to close its doors, saying that Linux does what it does, for free. The xxx$ billion in the bank will go to its shareholders, who have been dumb enough not to insist on dividends, despite the fact that MS has xxx$ billion in cash.

        We wish.
        • The xxx$ billion in the bank will go to its shareholders, who have been dumb enough not to insist on dividends, despite the fact that MS has xxx$ billion in cash.

          But they never needed to offer dividends because their share price has always been growing like gangbusters. Except for the past few years, when it has remained flat, and the next hundred years, where it will remain flat.
    • The board is required by law to act in the best interests of the shareholders. That means that they must try to make a profit.

      Now whether a specific company should close their doors is always a difficult to question, but if it is a reasonable alternative the board is required to consider it.

    • The sotck holders, quite literally, ownn the company. When you buy shares of stock you are buying a share of ownership of the company. Now most people never own many shares of a single company, much less than 1% and so their vote never really counts (they don't go to the shareholder meetings or anything). However usually there are a few investors with sizable chunks of stock. Sometimes they are company employees/founders/CEOs, but often not. Now the shareholders can hold a meeting and take a vote on what thye want done, majority rule, and it WILL be done since they own the company. Many companies never have to worry about this because someone like the founder and CEO will retain a 51% stock share and therefore have sole control, but that is not the case with Liquid. If the majority of shareholders vote to sell off all assets and liquidate the company, that is just what will happen.
      • That's the way it's supposed to work, but the various corporate bungles of the early 2000's have shown that shareholders have little or no voice in the operations of modern companies. The HP-Compaq merger would have been a good example of your point that shareholders should have the power, but was the final vote count even released? HP said it was 'close'.

        In unrelated news, President Bush's lawyers [yahoo.com] say he doesn't need Congress' approval to bomb Iraq. See any parallels here? ;)

  • Liquid Audio in Japan (Score:3, Interesting)

    by BJH ( 11355 ) on Monday August 26, 2002 @06:39AM (#4140013)

    Liquid Audio is infamous in Japan - it was one of the first two companies to be listed on the new Tokyo Stock Exchange "Mothers" board for venture companies; unfortunately, the relaxed listing rules allowed Japanese gangsters to get a foot in the door.

    Eventually, what happened was one of the company directors was kidnapped by the CEO(?), a rather interesting personage who was missing a chunk off one of his little fingers... for those of you familiar with Japan, that should immediately ring alarm bells ;)

    These days, they're called Cyber Music Entertainment. Their stock price peaked at around 1,590,000 yen in September 2000; these days, they trade at around 10,000 yen ...
    • I mean, dotcom companies can be funny, but 1,590,000 yen is $20,670 CDN, or about $13,022 US per share. LNUX didn't go that high. It seems a little funny.

      10,000 yen is about $130 CDN, or about $82 US per share. At that price they must be doing something right, right?
      • In general, prices of Japanese stocks are higher than what you'd see in the U.S. (at least; it sounds like Canada is similar), with fewer shares of stock per company. For instance, Yahoo Japan made news here two or three years ago when it hit 100 million yen (about US$950,000 at contemporary exchange rates) per share, but that was divided among just 10,000 or so shares IIRC.
    • a rather interesting personage who was missing a chunk off one of his little fingers... for those of you familiar with Japan, that should immediately ring alarm bells

      Qua ki ser pi ni ku?

  • So? (Score:3, Interesting)

    by neksys ( 87486 ) <grphillips AT gmail DOT com> on Monday August 26, 2002 @06:40AM (#4140016)
    Most of the comments I've seen so far have been along the lines of "They should just give the extra money to ..." or "Invest it in...!". Incorrect - the fact of the matter is that many, many businesses have been, and still are in the exact same position. The only way to *keep* shareholders is to show you have enough money to still give them a return on their investment even if the company goes belly up. There are three trains of thought on this: 1) make up fake revenues, a la Enron, WorldCom, etc. 2) go flat broke up forget about the people who trusted you to make then richer, or 3) ensure that the people with a vested interest in your company has a reason to stay on board. Liquid Audio (for all their faults) should be commended for their commitment to the stakeholders, even at a loss to the company - its seems to be such a rare thing with all the business improprieties on CNN. Money is the name of the game, and whether you like it or not, making investors happy is the nature of the beast.

  • They had revenue?! (Score:5, Funny)

    by eddy ( 18759 ) on Monday August 26, 2002 @06:49AM (#4140031) Homepage Journal

    They had $150,000 in revenue?! That's insane. What did they do, rent out part of the office?

  • Hearing a Johnny Cash song . . . (Score:3, Interesting)

    by Ezubaric ( 464724 ) on Monday August 26, 2002 @06:51AM (#4140034) Homepage

    Liquid Audio has never had a big footprint. It needs to either fold or radically reinvent the purpose of the company.

    We need to move away from the Dilbertesque model of a company loosing money while it's growing but never having a plan for afterward. Unless Liquid Audio has some magic plan to emerge from its cocoon a beautiful profitable company, it will just burn money indefinitely. This cannot be good for anyone. That money should be invested in a more realistic venture.

  • They aren't going anywhere (Score:3, Informative)

    by PureCreditor ( 300490 ) on Monday August 26, 2002 @06:52AM (#4140036)
    Especially they use a proprietary format. When I buy music, I wanna listen to it other than on the computer. Otherwise, might as well buy the real CD or logon Kazaa.

    And their selection is narrow. Marketing is not enough. So they're unheard to customers, unwise to computer geeks, and unliked to shareholders. It's time to give up and move on.

    Oh yea...and the so called "resurrection" of Napster is as hopeful as the Atari or NeXT.
    • Ummm... Stuntman, Test Drive, Unreal Tournament, and this little game called Neverwinter Nights are under the Atari label. ;)
      • Ummm... Stuntman, Test Drive, Unreal Tournament, and this little game called Neverwinter Nights are under the Atari label. ;)
        Exactly, they're under the Atari label. Atari as a company is no more and hasn't been for several years now. For that matter, the main thing I liked about Atari - that it was an American company in a Japanese market (consoles) - is now gone since they're owned, as a label, by Infogrames, which is a UK company. Not that there's anything wrong with that, but its a less romantic/nostalgic notion. Still, Infogrames is reportedly considering changing their name to Atari.

        The more obvious parallel in the parent quote was the fact that Napster is doomed to be the next Amiga. Amiga of course made their line of computers for a while before going bankrupt but vowed to return their line of computers soon. After years and years of Amiga diehards waiting and hoping Amiga announced their triumphant return - in the embedded devices market.

        I agree - Napster's never going to return. Especially now that Liquid Audio is getting Liquidated (*rimshot*) and they were doing similar things.

  • Best for shareholders (Score:3, Funny)

    by jukal ( 523582 ) on Monday August 26, 2002 @06:55AM (#4140041) Journal
    would be to change the business concept of this company and turn it into an investment company, which invests in new bubbles, and cashes in time.
    • would be to change the business concept of this company and turn it into an investment company

      These investors should in vest in my personal company. I can *guarantee* that I can take $5.6M and turn it in to $150K, so there's no risk here... hell, I'll even give them $151K!
    • It's not really a joke, many .com [tom.com] is actually doing that.
      • Yeah, it was a not a joke. If they have cash left, and no serious hopes of good ROI based on their current business concept, why not invest the money somewhere else. What is a joke, is the moral in it.

        But, if you spend some time thinking on it, is it morally better to waste all your shareholders money just waiting and seeing the cash burn?

  • They bought a company (shares) at what seemed to be a good deal.
    The company isn't making money, their good deal isn't that good.
    They can't sell their shares at the value they think they're worth (stock price) they want to liquidate the company (book value)
    Someone thinks the company is worth buying, they are offering to buy it for more then the stock price.

    Sounds like a bunch of whiney shareholders who may or may not be the majority who don't quite understand how this stock market thingie works.
    • Shareholders own the company. They have the right to tell it to do whatever the fuck they want it to do. If that means shutting down and divesting itself of all cash to send back to the shareholders then thats simply what the company has to do. It has nothing to do with them not knowing anything about the stock market. It is not unheard of for a company to shut down before it burns thru its capital if the management is smart enough to realize there's no chance in hell of making any money. It sounds like YOU are the one who knows nothing about the stock market.
      • Glad you resorted to profanity, makes you seem intelligent.
        A few points.
        The article doesn't explain if a majority of shareholders want to liquidate or not.
        Book value is not cash on hand, there may be illiquid assets, or debts that would reduce cash.
        The company is only worth what someone will pay for it. They bought, by their own admission, a dead end business.
        Many companies trade below their available cash on hand, this is normal for many companies. Being able to exploit their non cash assets later may provide a greater return rather then shutting down now.

  • Mitarotonda == Raider of the worst sort (Score:2, Interesting)

    by Anonymous Coward
    ``It's a lousy deal,'' says James Mitarotonda, an investor and chief executive of MM Companies,

    Yep, it is indeed a lousy deal for everyone but Mitarotonda and MM companies, formerly known as musicmaker.com. Remember them? They were shut down a couple of years ago around the time that Mitarotonda and his company (BGC) took control. I doubt he's thinking of anything but lining his own pockets and acquiring a large portion of that money stockpile in order to take over and shut down yet another company.

  • The buyout stinks (Score:3, Insightful)

    by cameldrv ( 53081 ) on Monday August 26, 2002 @07:13AM (#4140075)
    They are offering $3.00 per share in the buyout, less than the cash holdings of the company. They are effectively offering to buy a pile of cash for less than 90 cents on the dollar. The investors are saying "We'll just take the full $3.41, thanks." The management supports the buyout perhaps because of a sentimental attachment to the company, or perhaps because of golden parachutes they may (disclamer: I do not know this) be getting out of the 41 cents.

    • Re:The buyout stinks (Score:4, Interesting)

      by cyberlotnet ( 182742 ) on Monday August 26, 2002 @07:35AM (#4140109) Homepage Journal
      Ok before you take the time to try to post a smart comment to gather more karma.. READ THE STORY FULLY..

      They don't only get $3.00 per share, they also get stock in the new combined company...

      So they lose .40 cents per share, for the chance to make more money in the future.. This is the reason they invested there money in the first place...

      What we have here is a couple of stock buyers scared of the current market and looking to bail out all together, And in this case try to force every other stock holder to do the same.

      If instead they would hold on to the stock and "ride the wave" They have a chance at better returns in the future.
      • No, you have a group of investors who want to get as much as possible for what they own - not an unreasonable desire. If they get the full $3.41, they can invest it in whatever they want, instead of getting less cash and shares in a non-publically traded company. They're not even getting the cash they could if the they dumped their holding at market price. They realize, no doubt, that selling for less than full liquidation value merely gives the buyer a cash infusion - and, as the saying goes, "Cash is king."

        Look at it this way - if a company wanted LA's tech, they could buy it during the liquidation - sopmething the stockholders no doubt would like because they get even more money.

        The LA stockholders are being asked to pay $1.91 for each share of A that they get - they may feel they can make a better investment elsewhere.

        Given the current valuation of LA, the wave has already swamped them and the survivors are treading water until rescue.
      • What we have here is a couple of stock buyers scared of the current market and looking to bail out all together, And in this case try to force every other stock holder to do the same.

        and/or stock buyers that never intended to hold stock in the company in the first place. Some of them seem to be all too aware that the company is incapable of making money in it's current incarnation, and you have to wonder why people would invest in a company that they know won't make money. Simply put, they bought into it believing they could liquidate the company for it's value before it drained all of it's cash reserves.

        Too many people, in the last few years, have bought into the market looking for a way to make money (as quickly as possible), rather than investing in companies that they believe have good business models. A solid company will give you a good return on investment in the long term, but these people came in knowing that they could buy the stock below the company's value and are simply looking to cash out before the company gets itself into a merger that leaves them holding another company's stock altogether. Sure, it's within the stockholders' rights to do this, but the reality is that those people asking for it to be done only bought the stock to make a quick profit anyway, expecting the company to either hit big or burn out fast (the first of which would have given a good return on investment when they sold out, the second of which would allow them to liquidate the company).
      • Obviously, not everyone likes the opportunity presented in the buyout. I can understand how they would rather take their $3.41/share and seek opportunities elsewhere.

        The investors are under no obligation to support a sale/merger to a third party, and it's not hard to understand the resistance if the terms and conditions are less attractive than a flat-out liquidation. Why would the investors accept anything less than $3.41 per share, since they get that much with 0% risk???

        To me, any substitution of stock for cash would have to compensate the investors for the risk involved. As I see it, Liquid's business model is bankrupt. Nobody is going to buy that company and make any money with it, and everybody knows it. The only thing Liquid has is a pile of cash, so why sell the cash for anything less than face value?

        If I was a Liquid Audio investor (thank god I'm not), my attitude would be, "OK, I want Alliance Entertainment to pay me $3.41/share in cash. They can have 100% ownership of Liquid Audio, and can do whatever they want with it. If there is some way for them to make money with Liquid Audio, go for it. If they just want to buy a pile of cash for less than face value, then they can take a hike."
      • If instead they would hold on to the stock and "ride the wave" They have a chance at better returns in the future.

        I agree with you 100%!

        The first thing I do when I get up in the morning to run down to the beach and surf for an hour or two. The last thing I do before going to sleep at night is count my shares of Enron.

        -
  • Without going into the legal details and financial aspects, what are the technical leverages that Liquid Audio claims to offer vs. free competitors such as Ogg Vorbis.

    Thanks.

    • Re:Ogg Vorbis (Score:3, Informative)

      by mabinogi ( 74033 )
      From what I can tell, the only thing they had over things like Ogg Vorbis, and even MP3 is that they were there before those formats were as popular (or even existed in the case of vorbis).
      Their main competitor was Real, but Real were interested in low bitrate streaming, and Liquid were interested in digital distribution of high quality music.

      Then along came MP3, and people got free (if not necesarily legal) distribution of acceptable quality music, and so Liquid became irrelevant.

      Real survives because there's still a market for live streaming audio technology.

    • Re:Ogg Vorbis (Score:5, Informative)

      by Neon Spiral Injector ( 21234 ) on Monday August 26, 2002 @08:28AM (#4140203)
      The Liquid Audio files are fully Digital Rights Managed, I have one on my harddisk that I can no longer listen to, caues something changed on my computer.

      The song sucked anyway, but the ammount of hassle it took to get the player installed (along with some funky sound card drivers (I think they are installed to try to keep listeners from playing to the harddisk instead of speakers) was increadable.

      I'll never get another song in that format.

    • Re:Ogg Vorbis (Score:5, Informative)

      by Artifex ( 18308 ) on Monday August 26, 2002 @09:32AM (#4140441) Journal
      what are the technical leverages that Liquid Audio claims to offer vs. free competitors such as Ogg Vorbis

      Pretty much just DRM, which means the music industry was happy to use it in promos for new releases, etc.

  • Talk about Nerve (Score:4, Insightful)

    by mbone ( 558574 ) on Monday August 26, 2002 @08:09AM (#4140163)
    Let's see -

    The CEO is making $ 500K per year.

    Another co-founder is also making $500K per year.

    All of this on revenue of $600 K per year.

    And they say that shutting it down would ''...not represent[] the interests of all the shareholders.''

    Do the words "bloated" come to mind ?

    How about nervey ?

    How about stupid ?

    In my opinion much of the dot-com money was "value-subtracting," in that they took good money and did stupid things. Enough people did this that it poisoned the ability of real businesses to make real money, because the marketplace was conditioned to assume that things that cost money actually should be free.

    I cannot think of a much better example of a value-subtracting business than Liquid Audio.

    Shut it down.
    • Yup, bloated and stupid certainly do spring vividly from between the lines.

      Essentially, though, this shows the incredible power of corporate management. This is a company who are hemorrhaging $37 for every dollar they earn in *gross* revenue, and show no reasonable prospects of ever being profitable again... and instead of stepping aside and closing up shop, management, in return for a kickback of $3 million, want to sell the shareholders' investment at a 50% discount instead of giving it back to the shareholders.

      The fact that there is even a battle about this shows how easily led most shareholders are and how antagonistic modern management can be to the owners' interests.

      For all the talk about the shareholders wanting to liquidate being "corporate raiders", it seems that they, at least, are willing to face reality. There's no reason why Alliance can't buy any assets of Liquid Audio they want... in an auction, and then instead of forcing all the owners into a business they might not want to be a part of, they can choose whether they want to back that particular pony with their takings. I'm betting most of them wouldn't want to touch it with a ten-foot pole.

      All a merger does is force everyone's hand into investing a "new kind of company".
  • from the well-yeah dept.
    Aw, come on Chris, but some effort into it.

  • Liquidity (Score:3, Funny)

    by catfood ( 40112 ) on Monday August 26, 2002 @09:36AM (#4140462) Homepage
    With all the cash holdings, you don't have to ask why they called themselves "Liquid."
  • Liquid Audio = Another proprietary audio format, and this one doesn't even have a big company like MSFT backing it... don't let the door hit ya, guys.
  • That would be the day.

  • Yeah, piss it all away. (Score:4, Insightful)

    by Mulletproof ( 513805 ) on Monday August 26, 2002 @03:00PM (#4143054) Homepage Journal
    My God, people, don't you realize the ace in the hole this company has? 90% of the dotcom's out there would kill for the hard capital this company has. In fact, it's the entire reason the .com bust happened-- All these companmies were venture capitaled to the hilt without any real assets of there own. When they hit the wall, they hurt their investors... Bad. Hell, after umpteen years of existance Amazon.com has only recently posted in the black. And don't think Bezos wasn't sweating bullets every day until that point, because if confindence for one minute faded in his ability, he was so far in the debt hole not even confidence could escape. Not your debt or my debt, but high millions debt. And that's not counting how he had to deal with his workforce (damn near 80% temps-- Hire em, fire em, hire em fire em...) to finally get above water. But for Liquid Audio to actually have assets... Unless the their problems were seriously irrecoverable, that's a major advantage to just piss away. I guess it's all about money now as opposed to long term success. Why not.
  • or they're fools. Money is only as good as those who wield it. $150K in and $5.6M out: the money is talking, and it's saying "These guys don't know how to treat me right, I'm going somewhere else". They should shut down immediately, and take what they can, or they aren't the greedy bastards they should be.

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