PurchasePro founder’s $1.2 billion fortune wiped out

Kevin Ferguson

Friday, May 25, 2001 | 11:28 a.m.

PurchasePro founder Charles "Junior" Johnson was worth $1.26 billion at the height of his Las Vegas company's meteoric rise in stock value in late 1999.

How things change.

Now, days after he was either fired by the board of directors or quit as chairman and chief executive, the value of Johnson's company stock has dwindled to about $12.4 million.

Part of the reason is because PurchasePro stock has lost 99 percent of its value since its peak of $175 per share in December 1999. It closed Thursday at $1.67 and was trading this morning at $1.56.

Johnson has also sold nearly 6.1 million shares since March at an enormous loss, partly in order to meet a loan agreement. His total holdings of company shares totaled 13.5 million before the recent sales.

Last month Johnson sold 4.63 million shares at a price between $2.65 and $6.60, for a total value of $16.26 million. The company said in April that Johnson sold 1.45 million shares in March at an average price of $10 a share.

The company also said Johnson bought his shares -- 13.5 million -- at an average price of $16.10.

Johnson now holds about 7.4 million shares, PurchasePro filings indicate.

The Las Vegas-based business-to-business purchasing software company Johnson launched in October 1996 had a market capitalization, or value, of $5.76 billion during the height of the Internet boom. Today, with its stock trading below $2, the company's market cap is just $179.4 million.

For walking away from the company, the flamboyant Johnson could be walking into nearly a $1 million payday. Johnson is expected to receive a severance package worth $840,000, according to filings with the Securities and Exchange Commission.

His two-year PurchasePro contract, which expires this month, states that if the company terminates his contract, PurchasePro owes him 3.5 times his base salary ($240,000).

Johnson left the company following an emergency board meeting held Sunday night.

In recent months the company has been plagued with accounting issues, criticized for a months-long search for a chief financial officer and hit with numerous lawsuits by disgruntled shareholders.

Analysts say Johnson's departure could help restore credibility for the company.

Earlier this week Johnson told the Wall Street Journal he resigned to remove the focus of the lawsuits against him.

"Since I'm not there, it takes away the focus of litigation, and puts the focus back on running the business," he told the Journal.

A PurchasePro spokesman declined to comment on Johnson's departing negotiations with the board of directors or his severance package.

Johnson did not receive a bonus in 2000. He also voluntarily elected not to be paid any salary in fiscal year 2000, SEC filings state.

Johnson could not be reached for comment.

Prior to launching PurchasePro, Johnson had very little experience in the technology field, according to company documents. The Lexington, Ky.-native owned and operated video stores and fitness centers in Ohio before relocating to Las Vegas.

Johnson earned a business degree from the University of Cincinnati.

In 1996 he ran a company called Cart-it & Cabinetry, which developed casino carts and cabinetry.

Departing PurchasePro Sunday night, Johnson left with a cloud that continues to hover over the company he built into a 500-plus staff, and a team of executives that are trying to clean up an accounting disaster.

The company failed to file its quarterly report with the Securities and Exchange Commission, which was due last week. After notifying the SEC the documents would be late, the company failed to file the report within the five-day grace period.

Nasdaq Stock Market officials changed PurchasePro's trading symbol Thursday morning to PPROE.

"When a company fails to file (financial documents) within those five days, the company gets an 'E' added to its stock symbol," said Nasdaq spokesman Scott Peterson, speaking in generalities because he was not familiar with the PurchasePro case.

"That 'E' let's investors know the company was late in filing its documents. Part of the requirements to be listed on the Nasdaq is to file timely and accurate financial information," Peterson said.

Nasdaq policy prohibits its officials from discussing with the media negotiations it has with companies in financial straits. Therefore Peterson would not speculate if the company would be delisted.

This is not the first time PurchasePro has been late in filing its quarterly report. The company was tardy with its second-quarter financial report last year.

The day after the company said Johnson resigned, PurchasePro restated its first quarter earnings downward, which company officials may have to do yet again after straightening out the first quarter 10-Q report.

Earlier this week PurchasePro said it had a first quarter loss of $32.4 million, or 47 cents per share. On April 26 the company had reported a loss of $18.1 million, or 26 cents a share. Revenue restated this week was $17.1 million -- down from the originally reported $29.8 million.