Soros takes a flyer on BlueFly

By NANCY DILLON
DAILY NEWS BUSINESS WRITER

Originally published on October 21, 2003

New York Daily News
http://www.nydailynews.com

BlueFly took flight yesterday after billionaire investor George Soros pledged another $2 million in financing to the struggling e-tailer.

Shares in Midtown-based BlueFly shot up 38 cents to $1.79 on seven times their normal trading volume.

Soros has already thrown some $55 million into the company, giving him a 75.5% stake.

Despite BlueFly's stock pop yesterday and sales that continue to climb, the company still hasn't turned a profit.

Some analysts warn the designer depot remains a high-risk investment.

"It's inevitable Bluefly will be finished by the end of 2004, as it has never been successful at anything but burning cash," said Mike Markowski, director of research at StockDiagnostics.com, an independent research firm that tracks cash flow at public companies.

"Soros' investment is a desperate last gasp to delay the inevitable, which is a complete write-off of the previous $55 million he invested," Markowski said.

StockDiagnostics.com has assigned BlueFly its lowest cash-flow rating, Markowski said.

Still, BlueFly has built a following selling Prada handbags, Calvin Klein blazers and Waterford crystal goblets via its Web site at prices it claims are 30% to 75% cheaper than retail.

Soros, though his Soros Private Equity Partners' affiliates, purchased a special kind of bond, known as a promissory note, that mature next April 14. They carry an annual interest rate of 12%, BlueFly said in a statement.

The notes can be converted into stock in any financing that takes place subsequently, at the lowest price offered to investors.