Fatbrain.com jumps on Highland, Vulcan investment

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Shares of Fatbrain.com Inc. (Nasdaq: FATB) hustled up 2 1/8, or 11 percent, to 20 1/8 Monday after Highland Capital Partners and Paul Allen's Vulcan Ventures invested an additional $10 million in the digital publisher.

Last week, the online retailer of books, manuals and other training materials unveiled a new technology for selling books, magazine articles and other documents over the Internet. Several brokerage firms subsequently upgraded the stock.

Under the terms of the agreement, Highland will purchase unregistered shares of Fatbrain.com common stock for 110 percent of the five-day average closing price of Fatbrain.com's shares through Oct. 15. Highland will purchase warrants to make future investments in Fatbrain.com at 125 percent of the initial purchase price.

In its latest quarter, Fatbrain.com posted a smaller-than-expected loss, losing $5.9 million, or 52 cents a share, on sales of $5.8 million.

The company's new eMatter system lets publishers and individuals securely sell digital documents such as company research papers that have never been economical to print. Authors may use the service to sell their work directly to the reader, while magazine publishers may use it to resell articles that have been printed in past editions.

In a somewhat related announcement, former BancBoston Robertson Stephens internet analyst Keith Benjamin will join Highland's board of directors.

After trading at a 52-week low of 11 3/8 in January, the stock moved up to a high of 31 5/8 in March.

All five analysts tracking the stock rate it either a "buy" or "strong buy."

First Call consensus expects Fatbrain.com to lose 82 cents a share in its third quarter and $2.68 a share in the fiscal year.