Chicago Sun Times
May 27, 2000
BY HOWARD WOLINSKY BUSINESS REPORTER
Wall Street's soured view on high-tech stocks has opened a rift between divine interVentures, Chicago's darling Internet company, and its lead underwriter, adding to delays in the much ballyhooed, city-backed Goose Island incubator for high-tech start-ups.
Divine founder Andrew J. ``Flip'' Filipowski said Friday the $62.9 million ``habitat''--announced by Mayor Daley with fanfare and a $14 million tax subsidy last December--depends on divine completing an initial public offering of stock, originally set for late March.
The high-flying tech company even attracted Michael Jordan to serve on its board. In March, divine lent Jordan $1.3 million to buy 1 million shares of divine interVentures.
On Friday, Filipowski said he expects the IPO for divine, the Lisle-based Internet holding company, to take place this summer.
Divine's 7.2-acre high-tech incubator on the north end of Goose Island was slated to open this fall. The project had been forecast to create and retain 600 jobs. Filipowski said a redesign of the building at 1132 W. Blackhawk is to blame for delays there. A cash infusion from an initial public offering also is needed, he said.
``If we never went public, then we would probably never do it,'' he said.
``We have the flexibility to exercise our option there or not,'' Filipowski added. ``We have not even closed on the land yet. We were doing the design work along the way. The design work is not finished.''
Filipowski confirmed that Credit Suisse First Boston may be replaced as lead underwriter of the divine IPO because divine wants to move quickly while Credit Suisse prefers to wait until fall. Credit Suisse still has divine on its IPO calendar and declined to comment.
Divine's scaled-back plans--it expects to raise only $500 million from public and private sources vs. its original plans to raise $1.5 billion--led the company to lay off 29 employees last week in its partner-development unit, which brings in new business.
Filipowski said the company will be doing less business than anticipated and needed fewer employees.
Filipowski said he doesn't expect further layoffs ``as of this instance in time, but there could be [layoffs] depending on market conditions and a lot of other things.''
He said partner development now has 50 employees, and 50 more are in other units. Overall, divine has more than 700 employees in its headquarters and its dozens of affiliated companies.
Even without an IPO, with $100 million on hand, and spending money on expenses at a rate of $5 million a month, divine could continue operating without a fresh cash infusion for 20 months. But Filipowski said the company expects to become ``cash-flow positive'' in eight months, with revenue from its consulting, Web hosting and other service companies.
Christopher Hill, the city's planning commissioner, said he doesn't believe divine will scrap the Goose Island project. Delays in a project of that scope aren't unusual, and Filipowski has assured the city he's still committed to it, Hill said.
``Flip is a national, if not a global technological leader, and he's doing the best he can with this,'' Hill said. ``I think he's being prudent given the market conditions.''
Michael Holzer, industrial coordinator for the New City YMCA/LEED Council, said Goose Island development would remain lively without divine. But he said Filipowski's project promised to enrich the neighborhood's economy by mixing high-tech jobs with the island's more traditional factories.
Filipowski said divine plans to file final papers for the $140 million IPO next week, and to answer final questions from federal regulators. ``We'll be just about ready to pull the trigger on doing the scheduling [for the IPO],'' he said. ``We're very close.''
Contributing: Jessica Madore Fitch, David Roeder