Nov. 12, 2001 -- Managed hosting provider Exodus Communications today told owners of its common stock that their shares will in all likelihood be worthless.
"During the course of discussions with potential acquirers as well as strategic and/or financial investors, management has determined that regardless of the outcome of these discussions, it is likely that the company's common stock will have no value," the company said in a brief statement.
The announcement, while not unexpected, writes the final chapter for Exodus' public equity investors, whose shares were once valued at more than $80 apiece when Exodus was hailed as a standard-bearer of the Internet economy.
It also underscored the risk of all-stock merger deals, like Exodus' Sept. 2000 acquisition of the Global Center chain of data centers.
The deal, valued at $6.5 billion when announced 14 months ago, has been a disaster for Global Crossing, which accepted more than 100 million shares of Exodus' common stock in exchange for 11 data centers that housed more than 500 customers. Global Crossing took a charge against earnings in the third quarter, acknowledging its Exodus shares would have little or no value.
Shares of Exodus closed Monday at 9 cents a share, down 67 percent from Friday's closing price of 28 cents on the NASDAQ bulletin board market. Trading volume was 127 million shares. The company has 555 million shares outstanding. Exodus shares traded as low as 5 cents per share in early October.
Santa Clara-based Exodus, which filed for Chapter 11 protection on Sept. 27, is among the industry's largest data center operators, with 35 facilities in the US and nine more in Europe and Asia.
At the time of its Chapter 11 filing, Exodus said it hoped to emerge from bankruptcy with a "more appropriate capital structure." Exodus accumulated more than $3 billion in debt, and was on track to lose at least $500 million this year.
In its bankruptcy filing, Exodus reported assets of $3.32 billion and liabilities of $3.38 billion. Those liabilities include $2.98 billion owed to high-yield bondholders, who are expected to be influential in any resolution of Exodus' Chapter 11 case.
The list of unsecured creditors also includes several prominent technology companies who leased equipment to Exodus, including Cisco Systems (owed $92 million), Sun Microsystems (owed $26 million) and EMC, which is owed $18 million.