Mamma.com Sinks on Stock Sale

Shares in search engine operator Mamma.com (MAMA Quote) sank 11% early Wednesday after the company raised $16.6 million in a private placement of stock and warrants.

The Montreal-based company said the private placement will provide cash for possible acquisitions. "As Mamma.com aggressively pursues mergers and acquisitions that will complement its current metasearch engine, ad network and email marketing activities, enhancing the company's financial capacity is integral to the execution of our profitable growth objective," Chairman David Goldman said. "We continue to evaluate several opportunities that we believe will strengthen the company, and are now firmly positioned to conclude such a transaction."

The buyers will get 1.5 million shares and 606,392 five-year warrants exercisable in six months at $15.82 apiece. Mamma.com sold the shares at a 10% discount, the company said.

The sale comes just two months after the Securities and Exchange Commission said it was examining trading in Mamma.com, on the heels of a day in early March when the stock surged 155% in mind-boggling volume.

The steep run-up has brought the company some attention from elsewhere. Internet billionaire and Dallas Mavericks owner Mark Cuban said this spring that he took a big stake in the company.

Though tiny, the company has been well placed to enjoy the resurgence of the Internet business as illustrated by the rise of rivals such as Yahoo! (YHOO Quote), AskJeeves (ASKJ Quote) and Google.

Early Wednesday, Mamma.com fell $1.41 to $11.70.