Zapata Corp. has a rather eclectic history. It was founded as an oil company in 1953 by former President George Bush, better known these days as the father of George W. Later, under different ownership, Zapata gave up its oil interests and invested instead in fish processing and food packaging.
But Zapata saw the future – and it wasn’t fish. In April 1998 Zapata began its modest entry into the world of the Internet by acquiring two struggling Web magazines, Charged and Word. This, however, was just the beginning. One month later Zapata captured the attention of the investment community when it announced to the world that it had offered to buy Excite, one of the best-established search engines, for $1.7 billion. At the time Zapata’s market cap was $250 million. Excite had a market cap of $1.3 billion. (Market cap represents the number of shares outstanding multiplied by the current market price per share.)
The offer, which was faxed to Excite without prior notice, indicated that Zapata was prepared to pay $72 per share (a premium of about 20% over the then current price of Excite shares), but only if it were "mutually acceptable."
It wasn’t. Excite rejected the offer, apparently without giving it any serious consideration.
So what if the offer was rejected? Zapata was an Internet player now. To demonstrate its commitment to the Internet the Company announced a name change. Henceforth it would be ZAP. It pressed forward with its Internet strategy, placing ads which declared that "Zapata Will Buy Your Web Site," and would spend up to $400 million in cash and stock for these acquisitions.
On July 2nd Zapata’s shares closed at a price of $9.75. On July 6th, the Company announced that it had entered into letters of intent to acquire twenty one Internet properties. Investors responded. That day the stock closed at $21.50. The next day, July 7th, the stock sold as high as $24.50. The increase in volume was even more astounding. Just 20,000 shares of Zapata traded on July 2nd. 11,473,700 traded on July 6th! In fact, for the seventeen days prior to the news release, Zapata traded a total of approximately 800,000 shares. For the seventeen days after the announcement – approximately 66,000,000 shares. This, for a company that had a public float at the time of just over 9,000,000 shares.
And the people at Zapata? On July 6th and 7th the Company’s Executive Vice-President and its General Counsel sold 425,400 shares of the Company’s stock at prices ranging from $12.75 to $23.95, for a total of $6,739,676. Oh, they got the shares by exercising options at $4.63 per share.
And then Zapata changed its mind. On October 16th the Company announced that it was concerned about the future of the Internet and was withdrawing from all of the letters of intent (which had by that time increased to at least thirty-one).
On December 24, 1998 Zapata reversed fields. The Company told the world that it once again intended to acquire Internet properties and review potential online alliances. Right on cue, Zapata’s shares rocketed from 7 1/8 on December 22nd to 12 3/8 on December 24th. From there they drifted back downward, trading at just over $8 by early April. The Company had a remedy for that. On April 13th Zapata announced that it would spin off its Zap.com business to Zapata shareholders through a $108.9 million rights offering. On April 12th, the eve of the announcement the stock climbed back to 12.0625. The next day it closed at 10 3/8. With no new announcements the stock has drifted back down to the $7- $8.50 range
Zapata, by the way, apparently still has no substantial Internet assets aside from the two web publications. Although Zapata insists it has big plans for the Internet, the Company’s recent SEC filings warn that "current management has no operating experience in owning and operating Internet and e-commerce businesses". They do, however, have big plans.
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