Showing why you should be very careful in selecting your investors, online retailer Wine.com just got screwed over big time by Baker Capital.

As the name suggests, San Franscico Bay Area based Wine.com sells wine over the internet. Business had been decent, claimed the San Jose Mercury News. But in need of an additional investment, the company started talking to potential suitors that could buy the company. In the end Liberty Media offered $67.5m.

Baker Capital however, which was on the company's board of directors after an investment round last year, blocked the deal and pulled a stunt that is suitable for a summer movie twist.

With cash running out quickly, the VC undertook a much needed financing round. But this time the company was valued at only $35m. By investing $10m, Baker obtained a 65 per cent stake in the e-tailer. Management had no other option but to go along – it was either Baker's investment or bankruptcy.

Corporate raiders will probably applaud the move for its cunningness. Anyone with a conscious should curse Baker.

Baker is growing sour grapes

photo credit: Katia Grimmer

tags: wine.com, baker capital, corporate raider

31 Aug 2005