In the wake of big deals between Internet service providers and telecommunications companies, EarthLink Network said today that it plans to file for a secondary offering that will generate about $175.75 million.
The ISP said that 3 million shares of the company's common stock will be available, of which 1.5 million shares are to be offered by the company. The other 1.5 million shares are to be offered by certain of the company's stockholders.
EarthLink will raise about $87.75 million, based on Friday's closing stock price of $58.5, excluding charges associated with the offering. The company will not receive any portion of the proceeds from the shares sold by stockholders.
The nationwide ISP expects to complete the offering in June 1998--as soon as possible after closing its pending deal with Sprint. EarthLink said it intends to use the net proceeds of the offering for general corporate purposes.
The company's offering comes in the wake of a number of deals between ISPs and telecommunications companies that are trying to leverage their networks in an effort to provide customers with a smorgasbord of communication services from one provider.
EarthLink has granted the underwriters an option to purchase up to an additional 450,000 shares of common stock from the company to cover over-allotments, if any.
The company's stock has jumped more than 130 percent since the beginning of the year.
At the end of the March quarter, EarthLink had $16.7 million in cash and cash equivalents. As of March 31, 1998, the company had an accumulated deficit of about $72.5 million, according to a recent filing with the Securities and Exchange Commission.
EarthLink said it believes that available cash will be sufficient to meet its operating expenses and capital requirements for at least the next 12 months.
In addition, once the deal with Sprint closes, EarthLink will obtain about $24 million in cash and have available a $25 million credit facility in the form of convertible debt financing, increasing to $100 million over a three-year period, at an interest rate of 6 percent per annum.
In February, the company announced a long-term strategic alliance with Sprint, in which the telecommunications company has tendered to purchase approximately 1.25 million shares of EarthLink's common stock at $45 per share.
During the first quarter of 1997, the company sold 2.28 million shares of common stock in its initial public offering. Net proceeds from the offering were approximately $26.4 million.