Cogent Investors Ante Up (Again)

Investors in Cogent Communications Group Inc. (Amex: COI) have taken a 96.6 percent stake in the company as Cogent's plan to avoid bankruptcy falls into place. Filings made with the U.S. Securities and Exchange Commission (SEC) show that Cogent's lead investors, including Jerusalem Venture Partners, Oak Investment Partners, and WorldView Technology Partners, have helped the company raise the $41 million it needed to trim its debt with Cisco Systems Inc. (Nasdaq: CSCO).

The Cogent investors traded preferred shares for new common ones and bought several kinds of newly issued preferred stock to complete the transaction. With their help, and Cisco's benevolence, Cogent has cut its debt to its largest equipment supplier to about $17 million from $262.8 million (see Cisco Powers Cogent's Restructuring).

James Wei, a WorldView founder, acquired 10,000 of Cogent's new Series G shares, each of which equals about 5,795 shares of common stock, according to the filings. Wei also converted the preferred shares he owned under the old company structure to 2,315,431 shares of common stock. Another filing shows that Edward Glassmeyer, general partner at Oak Investment Partners, converted more than 2 million preferred shares to common stock and purchased 10,000 new G-1 shares, each representing 5,867.3 common shares.

Some think it's amazing the company's survived so tenaciously. "[CEO] Dave Schaeffer basically had Cisco by the balls with huge vendor financing," says one industry analyst, who asked not to be named. "This is a real 'build it and they will come' network."

But the same analyst says Cogent's proposition of "100 Mbit/s for $1,000 a month!" is compelling. Trouble is, to get the big corporate customers it needs, Cogent must put big bucks into network expansion. So far, it's done so through a mix of build-outs and acquisitions (see Cogent Munches Midwestern ISP, Cogent Acquires PSINet, and Cogent Buying Binge: Another Bubble? ).

Given these challenges, and growing competition in the Ethernet space from the incumbent Bells and IXCs, the analyst says he admires Schaeffer's ability to convince his backers the deal will ultimately be worth it, "even though he has to screw them now."

Cogent's early-2003 figures hint at improving prospects (see below). In fact, it looks as if revenues have grown from about $3.5 million for the first quarter of 2002 to $14.2 million for the quarter ended March 31, 2003. More will be revealed when the firm releases its next quarterly financials -- set to happen on or before August 15.

— Mary Jander, Senior Editor, Light Reading

joestudz 12/4/2012 | 11:38:28 PM
re: Cogent Investors Ante Up (Again) So how many common shares are there now? How many shares are there if you take into sccount the conversion of new prefferred and options COI has issued to employees and management?
BobbyMax 12/4/2012 | 11:38:21 PM
re: Cogent Investors Ante Up (Again) Cogent has spent a lot of VC money. It is not clear as to how the changing of shares can we improve the profitability of the company. I am not sure about the viablity of Cogent as a business entity.
gea 12/4/2012 | 11:38:20 PM
re: Cogent Investors Ante Up (Again) BobbyMax:

All your base are belong to us.
10Gig 12/4/2012 | 11:38:19 PM
re: Cogent Investors Ante Up (Again) BobbyMax:

All your base are belong to us
lightmaster 12/4/2012 | 11:37:44 PM
re: Cogent Investors Ante Up (Again) If you look into the financials, I believe you will find that most of Cogents revenue comes from their aquisitions of businesses that were loosing money (traditional services from PSInet, etc). I don't think it has much to do with their marketing gimick of multi-megabit services for peanuts.

What differentiates them from other ISPs is that they own their own fiber optic backbone. This was thought to be an asset when they started, but is now a liability. Long-haul capacity is cheap and should be outsourced to concentrate on customer service and other differentiators.

But, they are GREAT at marketing... to the investment community.
dc_optics 12/4/2012 | 11:37:43 PM
re: Cogent Investors Ante Up (Again) If you look real close you will see that Cogent is great at moving numbers around to make things look good on a spreadsheet. They still seem to be lighting buildings and not customers. Lit buildings don't pay the bills. Customers do.
awgn 12/4/2012 | 11:37:42 PM
re: Cogent Investors Ante Up (Again) This cannot be BobbyMax, there is no commentry on Indians.
Sign In