Dissecting The InfoSpace Dot Con
from the revenue?-we-don't-need-no-steenkin'-revenue... dept
InfoSpace was a company that definitely scared off a lot of people, thanks to the sheer hype spewing from the CEO's mouth. During the boom years, there were a lot of people wondering just what the company actually did. In 2002, we noted that atheists were rejoicing when InfoSpace was delisted just a couple years after CEO Naveen Jain was quoted as saying: "There are two kinds of people in this world... those who don't believe in God, and those who believe in God and InfoSpace. That's OK -- the nonbelievers will be converted when we become a trillion-dollar company." It turns out that Jain wasn't just over-emphasizing the future prospects of the company, that (at the time) was nothing more than a random collection of content services (white pages, weather, horoscopes, etc.), he was outright lying about the existing business situation for the company. The Seattle Times is running a fascinating look at the con-job pulled by Jain to take a company that wasn't anything special, take it public, and then do anything and everything to boost the stock, including lying about the company's prospects and eventually doing a bunch of "lazy susan" deals, where InfoSpace would invest in a company (including one owned by Jain's brother) who would then turn around and "buy" services from InfoSpace -- turning existing cash into revenue. Meanwhile, the folks at Silicon Beat wonder if this sort of scam would have happened in Silicon Valley -- noting that all of the worst dot con scams all seemed to happen outside the Valley. (Updated to correct: InfoSpace was delisted, but did not declare bankruptcy).
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crime appears to pay well for some
As a result a completely nothing company pretended to have 100s of millions in revenue and beat wall street expectations with completely bogus revenue, pushing stock up just long enough for insiders to dump their stock and become amazingly wealthy.
What I didnt see was anyone going to jail for all this accounting and securities fraud (knowingly lying about revenues). Do they only put homemakers in jail for that sort of thing?
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Infospace
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