Paul Allen's Bid to Buy Majority Stake in Go2Net Falls Short

Computergram International, May 11, 1999

Microsoft co-founder and billionaire investor Paul Allen has failed in his bid to acquire a controlling interest in web portal Go2Net Inc and will likely end up with a one-third stake instead. Allen's plan, announced in March, was to pay $300m for new preferred stock in the company and to buy $450m worth of existing common stock at $90 per share - a slight premium over the $87 the shares were trading at then. If completed the purchases would have given him 54% of the Seattle-based firm.

The problem was that, after the announcement, Go2Net shares jumped up to more than $180. Thus no shares were tended to Allen by the April 15 expiration date of the offer. Allen has thus far purchased more than half of the preferred shares and awaits a shareholder vote next month to see if he can buy the rest. Shareholders must also approve the sale of 1.4 million shares from company insiders at $90 each.

If both those sales are allowed to proceed, as expected, Allen's one-third share will give him the right to appoint two out the company's five board members, with input on the appointment of two more. Thus he should be able to go ahead with his plans for Go2Net to become part of a high-speed internet service based on his cable holdings, despite missing out on the majority stake.