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STOCK WATCH / Robert Hanley

Liquidation Puts an End to CompuSave

March 22, 1987|ROBERT HANLEY

As if to remind investors that there is no such thing as a "risk-free" investment, embattled CompuSave Corp. is now being liquidated after nearly a year of bankruptcy.

And the investors who own CompuSave stock--which once traded for more than $10 a share--now own just so much pretty paper.

The Irvine-based company, which ceased all operations last May when it filed for protection under Chapter 11 of the federal Bankruptcy Code, began liquidation proceedings this month to satisfy the creditors to whom CompuSave owes an aggregate of about $4 million.

Marketdisc Corp., an Irvine-based company that once was a supplier to CompuSave, has offered $116,000 for CompuSave's assets, said Ed Yoshimura, CompuSave's court-appointed trustee. A hearing to consider Marketdisc's offer will be held March 30, he said.

Grant McPhail, Marketdisc's chief executive officer, said his company wants to acquire the "nuts and bolts and other stuff" it would have to buy anyway. "The technology and equipment," he said, "is so obsolete it's of no value."

CompuSave's secured creditors--who represent a fairly small percentage of the company's creditors, will get their share first, Yoshimura said. If anything is left, it will be distributed to the unsecured creditors.

Sadly, the investors who bought about 66% of CompuSave's 4 million outstanding shares will "get nothing," said David Young, the company's acting chief executive officer.

CompuSave blasted onto the scene in 1982 with a video shopping terminal that the company hoped would revolutionize retailing forever. In 1984 it went public at $5 a share, rocketing skyward to an all-time high of $10.625 a share the following year.

The machines, which looked like a cross between a computer and a television set, were to be placed in supermarkets, convenience stores and the like. Consumers would then be able to use the machines to buy virtually everything from fishing rods to videocassette players, paying for their purchases with credit cards and waiting for CompuSave to deliver the goods from its Irvine warehouse.

There was just one catch, of course--people had to use it.

They didn't.

Things began to sour in mid-1985 when CompuSave went into volume production of the machine. Sales through the kiosks were dismal, and it wasn't long before the devices were being used to dispense "Pop Larsen's" free do-it-yourself advice at a number of Builders Emporium outlets.

After a string of setbacks that included an anonymous smear campaign in late 1985 that drove CompuSave stock into the $3-a-share range, conditions worsened by last May when a rights offering that CompuSave hoped would raise about $5 million in desperately needed cash went undersubscribed.

On May 7, the day CompuSave filed for its Chapter 11 bankruptcy, its stock was quoted at a bid price of only 18.75 cents a share. Recently, a market maker has offered to sell the stock for a penny a share, but nobody has been willing to buy.

"End of story," remarked Larry Butler, a broker with Costa Mesa-based Newport Securities Inc., who once traded in CompuSave for his clients. "I probably have 400 or 500 shares floating around, but it's worthless."

Investors nervously awaiting the unveiling of IBM's new line of clone-proof personal computers next month have been unloading their holdings in companies that stand to lose business as a result of the new machines, according to several technology stock analysts.

Among the hardest hit are some of the disk drive equipment makers that have benefited from sales related to the current IBM personal computers, including Western Digital Corp. in Irvine.

In the last week, Western Digital's stock slid $3.375 to $23.50--substantially lower than its all-time high of $31.25 on Feb. 18. Although Western Digital officials admit that they are among the companies whose equipment will not be included in the new IBM machines, they offer other explanations, as well, for their stock's dive.

Company officials say their stock is probably among those being sold off in a wave of end-of-the-quarter profit-taking by portfolio managers anxious to show strong performance for their quarterly review. The stock opened the year at $18.50 and even selling in the mid-$20 range represents a healthy profit, this theory goes.

Further, officials say, the company's recently announced debenture conversion program, which allows debt holders to buy shares at $17.50, virtually assures that all the debentures will be exchanged for stock. However, because some institutional holders are not allowed to hold shares that do not pay dividends, the company says shareholders could be selling now to avoid any downward price pressure that a sell-off by institutional holders could bring.

Times staff writer Carla Lazzareschi contributed to this story.

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