Billionaire Paul Allen’s vision for a “wired world” continues to fade after another of his media and technology investments filed for bankruptcy yesterday.
Allen’s stake in cable and phone company RCN is virtually worthless under the company’s plan to lighten its debt load. RCN ran into trouble after it spent heavily building its own network to challenge entrenched cable and phone companies.
The world’s fifth-richest man spent $1.65 billion in 1999 to buy 25 percent of RCN. Late last year, he sold 40 percent of his interest for a mere $2 million.
Allen still owned about 15 percent of the company at the end of last year, according to the most recent public filings.
A spokesman for Allen didn’t return a call seeking comment.
Allen, whose track record of failed investments has been widely reported, has lost at least $9 billion pursuing his technology-based strategy. His fortune peaked at $30 billion in 1999, and has since dropped by almost one-third, according to Forbes magazine.
Allen sent his chief investment guru William Savoy packing last year after selling or writing off dozens of investments. He has since invested in more mundane sectors such as real estate and energy companies.
His investment will be wiped out under RCN’s proposal to exit bankruptcy later this year. Shareholders will get warrants for 2 percent of the reorganized company’s stock – that is, if the ultimate value of RCN exceeds $1.7 billion.
“It’s really not worth a whole lot,” Brent Brewer, a debt analyst at APS Financial, said.
RCN, which once traded as high as $75, closed yesterday at about 15 cents.
RCN expects the plan to reduce its debt to $480 million from $1.7 billion by giving bondholders most of the equity in the company. Deutsche Bank also agreed to give the company $460 million in financing to help it through bankruptcy.
RCN sells cable, Internet and phone services to about 435,000 customers in markets including New York, Boston and Chicago. The company, which has 85,000 customers in New York, said the bankruptcy won’t disrupt service.
Allen is still the majority shareholder in cable company Charter Communications. Charter also is struggling with its debt and has had to refinance some of that in an effort to postpone paying it back.
Allen, who made his fortune co-founding software giant Microsoft, hasn’t given up on high technology and has been striking deals with cable companies for his advanced set-top boxes for channel-surfing.
He appeared at the cable industry’s convention earlier this year, leading to speculation that he may be interested in expanding Charter.
Worthless
Bankrupt cable/telecom provider RCN is the latest investment failure for Microsoft co-founder Paul Allen, whose net worth has fallen $9B since 1999, to $21B.*
Other bad bets have included biotech VaxGen; failed wireless ISP Metricom; Oxygen TV net; and the money-losing Portland Trailblazers basketball team.
The RCN story:
25% RCN stake bought by Allen in 1999: $1.65B
Price tag for 10% stake Allen sells in late 2003: $2M
Allen’s remaining 15% after yesterday’s Chap. 11 filing: Worthless
*Source: Forbes