While the Supreme Court set in motion a liberalization of state-level wine laws last year with its decision on direct wine shipments, the leading e-commerce site for wine was quickly–and ironically–running out of money according to boardroom dealings exposed in a San Francisco courthouse.
A story in last week’s Times Small Business column detailed the travails of wine.com. The domain name itself set a record in 1999 for wine domains fetching $2.9 million. Now it may be one of the firm’s most valuable assets.
Wine.com rolled several companies together in the bursting of the tech bubble to sell wine via the internet to consumers. By 2004, the company was looking for funds and raised $20 million, most of it from Baker Capital, a hedge fund in New York City according to the story.
A year later, the company was in a “distressed situation” according to former CEO George Garrick. John Malone’s Liberty Media allegedly offered to buy the company for $67.5 million and bring it into their stable alongside QVC, Encore, Starz, and Provide Commerce’s sales of flowers, fruit and steaks on the web. Garrick and the wine.com board contend they accepted the deal while Baker Capital invoked their veto of any potential merger. Garrick and other investors are now suing Baker Capital for blocking the deal and subsequently offering financing that diluted existing investors by 60-70 percent.
Just how much money Baker Capital decanted into wine.com in 2005 is unclear since wine.com is a privately held company. Nor is it clear whether they have righted the ship that caused $20 million to disappear between 2004 and 2005. Maybe they are on an even keel now. But if they do have to liquidate, just don’t use Provide to send them flowers.