What Was eToys Thinking? - TheStreet

Maybe some e-tailing businesses are even worse than some retailing businesses. Maybe they are even crummier than some catalogue businesses. Man can some of them burn the cash.

Four months ago

eToys

(ETYS)

issued a deal, a convertible bond, and put the following note in the S-1, the formal document for the offering: "We believe that current cash, cash equivalents and cash that may be generated from operations, together with the net proceeds of the note offering will be sufficient to meet our anticipated cash needs through December 31, 2000."

As I like to say : "Wrong!"

The people who bought this convertible got smoked, just smoked, as eToys just came right back to the well with another deal that was really dilutive. And nothing really happened except the economy grew at a great pace and business was pretty good! (May excepted.)

Of course eToys covered itself well by saying in the next sentence that things might not work out and they would have to raise more money. But if you took them seriously you would not have thought they would burn through that convert money so fast.

Strangely, I don't think conventional retailers burn through cash as fast as these folk. Or catalogue companies for that matter.

What were we thinking?

Random musings:

I'm jaunting uptown to the

Bear Stearns

conference where I am speaking and checking out on some tech, especially some phone tech. So the turret will be vacant for a few hours.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.