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A fake takeover offer?
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December 29, 2000: 4:54 p.m. ET
Web-based clothing retailer's stock volume spikes after two offers
by Staff Writer David Kleinbard
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NEW YORK (CNNfn) - Fashionmall.com Inc., a small Web-based clothing retailer, has suddenly been cast into the spotlight after receiving two takeover offers in as many days.
Narax Inc., a Beverly Hills, Calif.-based firm, on Thursday issued a press release offering to acquire all of the outstanding stock of Fashionmall.com for $3.50 per share. That was a 75 percent premium over Fashionmall's closing price on Dec. 27, and would value the Web firm at about $26 million.
New York-based Fashionmall on Friday issued a press release expressing doubt about the validity of Narax's offer, saying that it couldn't find any background information about Narax or its president, Michael Savage. In addition, Narax hasn't disclosed what its source of funds would be for the acquisition.
Just hours after casting doubts on the Narax offer , Fashionmall received a separate acquisition offer from GenesisIntermedia.com (GENI: Research, Estimates), a Van Nuys, Calif.-based company that got its start selling audio- and videotapes and mentoring services about interpersonal relationships and commodities trading.
GenesisIntermedia issued a press release saying that it had acquired, through various open market transactions, a 7 percent stake in Fashionmall's common stock. In addition, it offered to acquire the remainder of the company in a transaction valued at $7 per Fashionmall share -- a premium of 170 percent over Thursday's closing price.
For each Fashionmall share, GenesisIntermedia offered $2 per share in cash and 0.29 shares of GenesisIntermedia common stock, which closed Thursday at $17.37.
Volume in Fashionmall's stock, which averages about 39,500 shares per day, soared to more than 1.1 million shares Friday afternoon, with the stock gaining 78 cents to $3.37.
A serious offer
Benjamin Narasin, Fashionmall's CEO, said that his company's board will consider the GenesisIntermedia offer, and that it appears to be more legitimate than the one from Narax.
"My initial impression is that it's a serious offer from a serious firm," Narasin told CNNfn.com.
However, GenesisIntermedia had only $1.6 million in cash as of Sept. 30, far short of the $14 million it would need to offer Fashionmall's shareholders $2 per share in cash. Robert Bleckman, investor relations spokesman for GenesisIntermedia, said that the company was trying to raise $25 million through a private sale of securities.
GenesisIntermedia is run by Ramy El-Batrawi, whose diverse business holdings include International Futures Brokerage Company, Mars & Venus Counseling Centers, Genesis Aviation and Trade Your Way To Riches Inc.
El-Batrawi's promotion of commodities trading has attracted attention from the Commodity Futures Trading Commission. According to an SEC filing GenesisIntermedia made, the CFTC has requested various documents relating to the company's marketing of an infomercial titled "Success and You," which promotes and markets the "Trade Your Way to Riches" video series. To date, no enforcement action has been taken against GenesisIntermedia or its employees, the filing says.
The Narax offer
Fashionmall's Narasin said that he was skeptical about the Narax offer for several reasons. He noted that the only communication from Narax preceding the press release was a fax outlining the offer which included the sentence, "Please note that this communication describes a non-binding proposal and does not constitute a binding offer."
"I believe that anyone who was truly serious about acquiring us would have wanted to have discussions with us first," Narasin said in a statement. 
Fashionmall's preliminary investigation failed to turn up any information about Narax. In a telephone interview with CNNfn.com, Savage didn't provide any information about his background nor about the company's past transactions, although he said he would do so later in the day. Savage said that he had offered to meet with Fashionmall's executives at the offices of Narax's investment banker. However, he declined to name the investment banking firm.
"We are prepared to go forward," Savage told CNNfn.com. "What Mr. Narasin really wants to know is whether we have the ability to raise the cash, and he is correct in trying to come to that conclusion. That is what we are addressing this morning."
"I am perplexed by the total lack of information on this company," Narasin told CNNfn.com. The Fashionmall chief said he searched through several databases, including Dun & Bradstreet, and found nothing on Narax. "Mr. Savage said yesterday that he would provide me with background information on his company, and he never sent it," Narasin said.
Unusual trading volume in shares
This is not the first time that Fashionmall has received a mysterious takeover offer. A similar offer was made in October by an Internet holding company called Sitestar trading on the Nasdaq bulletin board, and nothing ever came of it.
"One reason we are skeptical of the Narax offer is that it is similar in form, function and style to the Sitestar one," Narasin said. "It uses a press release as a takeover vehicle, which is totally inappropriate."
In addition, there was an unusual spike in Fashionmall's trading volume before Narax issued its takeover offer. Volume in Fashionmall's stock, which averages about 39,000 shares per day, reached 197,700 on Dec. 22 and 220,000 on Dec. 27.
Fashionmall has about $35 million cash, or $5 per share, which helps explain why the small company has attracted so much interest from potential buyers. 
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