CoolSavings’ mascot becomes an apt symbol

Aug. 16, 2001, Chicago Tribune
TechLife column: Barbara Rose

Few Internet icons are as easily recognized as CoolSavings .com’s pink piggy-bank wearing black sunglasses.

The pig’s cheerful smile suggests the warm feeling customers get when they save money by registering online for store coupons and discounts.

But for shareholders, the mascot is a different sort of symbol–a reminder that it seldom pays to get greedy unless you’ve got an in with the pig.

CoolSavings consumed public investors’ money and returned little more than a grunt. Meanwhile, its board offered the company’s CEO a small feast.

The online marketer went public 15 months ago at $7 a share, raising $23 million from public investors who collectively bought 9 percent of CoolSavings ‘ shares.

On Wednesday, they were valued at 17 cents each; less than $1 million in all.

Private backers who fed the firm $35 million before the IPO have done little better. Though they bought stock more cheaply–at a pre-IPO average of $1.49–they’ve had steep paper losses.

There’s another important difference between them and less fortunate IPO investors. Private backers, along with founder Steven Golden, control five seats on CoolSavings ‘ seven-member board. And as board members, they’re in a position to take some of the sting out of their disappointment.

How? Four directors voted July 18 to forgive themselves and other directors a total of $3.7 million in company loans to buy stock. The board has been exceptionally good to Golden, who remains on the payroll even though he stepped down July 31 as CEO and chairman.

Golden exited with a three-year, $345,000 per annum contract. His contract, disclosed in a recent Securities and Exchange Commission filing, started in April, when he and the board were scrambling to arrange the financial bailout that coincided with his exit.

Special deals for insiders aren’t uncommon. Webvan’s George Shaheen gave back 1.2 million Webvan shares in exchange for forgiveness of a $6.7 million company loan to pay his tax bill on the bonus shares.

Shaheen, of course, is the high-profile former consulting executive who was lured to Webvan with a boom-time contract that promised $375,000 per annum for life–a pledge that puts Shaheen at the top of the now bankrupt company’s list of unsecured creditors.

There’s no telling whether Golden will make out better on his contract with CoolSavings , though the company’s new investor–Virginia-based Landmark Communications Inc.–has pledged up to $15 million through the end of the year, when CoolSavings expects to break even.

What’s clear is that CoolSavings ‘ board was generous to Golden, a former Smith Barney financial consultant who started CoolSavings in 1995. His initial backer was one of his brother’s friends–retired Michigan businessman Richard H. Rogel, CoolSavings ‘ largest individual shareholder, with a 20 percent stake.

Rogel stepped forward repeatedly with cash to keep CoolSavings going, but the company likely would have run out of money if it hadn’t managed to go public in May 2000.

When other dot-coms were tightening their belts last summer, Golden, flush with IPO cash, was on a hiring and marketing spree. At its peak, 315 people worked on four floors at 360 N. Michigan Ave., where a giant meeting room doubled as a basketball court.

Partly for pulling off the IPO, Golden was awarded a $200,000 bonus last year on top of his $299,999 salary, despite the company’s miserable performance. A $100 investment in CoolSavings ‘ IPO was worth $18.08 by year-end.

In the first quarter this year, CoolSavings lost $8.4 million; general and administrative costs alone consumed the company’s $4.4 million gross profit.

Yet the board awarded Golden his rich three-year contract in April, when CoolSavings was negotiating its cash bailout from Landmark, the only investor to step forward with an offer.

Rogel, who now serves as non-operating chairman, was asked whether the directors looked after Golden at other shareholders’ expense? “We honor our contracts,” Rogel said.

The lesson? When a pig offers you a chance to invest, make sure you get a seat on the porker’s board.

Copyright 2001, Chicago Tribune. All rights reserved.