Pan-European Online Music Retailer Goes BustLONDON -- Boxman.com, a pan-European online music retailer, faced bankruptcy as time ran out last month to find a buyer or a new infusion of cash. At the time of this writing a liquidation meeting was in process without help in sight.
Boxman was founded in Sweden in 1997 by Ola Ahlvarsson, the Swedish Internet whiz kid, who bailed out last year to found his own consultancy.
Months later Boxman took over Yaoplay, a music label owned by Internet Music and Video Shop, a British holding company. As a result, Boxman became a UK company, and initial liquidation is being held under British law.
What complicates matters, said Boxman spokesman Bobby Leach of Shandwick PR, is the liquidation in seven other countries, each held under separate national laws.
The company has been in trouble since April when efforts to float $450 million failed. Losses mounted totaling $36 million in the six months ending June 30 on sales of slightly more than $8 million.
The company's burn rate, sources said, was between $1.5 million and $3 million per month. "There was a partial offering of funding, but nowhere near the level they sought," Leach said. "They needed additional equity to continue development, marketing and to cover IT expenditures, and the money just wasn't forthcoming."
Boxman is the third dot-com with a Swedish base to go belly up in the last six months. Clothing retailer Boo.com went bankrupt in May -- but is coming back this month under US auspices -- and Dressmart, another apparel merchant, collapsed in August.
Leach said it was unfair to pinpoint Swedish companies as being most failure-prone. Sweden, he said, was one of the most advanced Internet countries, and dot-coms had launched there much earlier than elsewhere.
In UK liquidation processes, an accounting firm is appointed as liquidator. The firm is responsible for "the ordinary wind down of a company and the sale of assets to get something for the creditors," Leach said.
The business disappears unless someone buys the name. Leach said that while it was still possible someone would show up at the last minute to buy the prestige and good will the name implied, it seemed highly unlikely.
What made the collapse somewhat out of the ordinary was the quality of the investors. Among the 500 shareholders were three well-known bands: the UK's Madness and Sweden's Roxette and Ace of Base.
French businessman Bernhard Arnault was one investor and Alain Levy, the former CEO of Polygram and a Boxman director, was another.
The Financial Times quoted Boxman CEO Tony Salter as saying that a fragmented shareholder list -- in which no one owned more than 4 percent of the company -- made new fundraising difficult if not impossible.