Bill Gross, the founder of Idealab, has survived so many close calls he could be the Houdini of high-tech investing.
Hailed as a new-media prophet after launching the Pasadena company in 1996 to "incubate" start-up ventures, Gross was battered when the dot-com bubble burst in 2000. Several of his bets, including Web retailing highfliers EToys and Eve.com, went belly up.
When big-name investors led by mutual fund giant T. Rowe Price sued him for alleged self-dealing and fraud, the man Time magazine called the "billion-dollar brain" downsized, replacing his Ferrari with a Lexus and a minivan. Still, in December, Gross failed to pay off a $50-million personal loan.
Now, like a magician wriggling free of a straitjacket, the 47-year-old entrepreneur appears to be escaping ruin once again. At a special meeting today, Idealab shareholders will vote on a plan, already unanimously approved by the board, to pay off his loan, according to a recent proxy statement obtained by The Times.
Under the deal, Gross would repay the $50 million to the privately held company over the next four years, plus interest and a $1-million annual fee. That is enough time, the proxy asserts, for one or more of Idealab's 14 companies -- operating in such fields as robotics, solar energy and online retailing -- to reach maturity and return a profit to shareholders.
The proxy warns that if Gross isn't bailed out, and Bank of America forecloses on his loan, investors could suffer. The bank could use the Idealab stock it holds as collateral for the loan to force a premature liquidation of some assets at fire sale prices.
In an interview at Idealab's headquarters, an open, hangar-like space where enterprises are identified by signs hanging from the ceiling, Gross said shareholders would be rewarded for their patience. Idealab, which has raised more than $1 billion from investors over the last decade, is on the verge of paying its first dividend, he said.
"We worked hard over the last four years to rebuild our reputation," said the bespectacled inventor, who is not to be confused with the well-known bond fund manager of the same name. "My real pride will be when we prove that Idealab was a worthwhile investment, and that's coming soon."
In the view of some shareholders, however, it's deja vu all over again.
Gross' $50-million BofA loan was a central issue in the investor lawsuit filed in 2002. The complaint alleged that directors secretly tried to pay off the loan when it originally came due in 2000 "to keep Gross out of personal bankruptcy."
