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Another day, another round of bad news for



. But still the show goes on.

One day after the

news broke widely that the

Federal Trade Commission

had launched an inquiry into the online advertising firm's privacy practices, the Michigan attorney general filed legal action Thursday, alleging that DoubleClick violated consumer-protection laws by invading Internet surfers' personal


The Michigan news, coming as DoubleClick finished up a roadshow for a secondary offering of stock, accelerated the stock's decline and sliced about $100 million from the more than $600 million that the company hoped to raise. Thursday night, the company said the offering was still on schedule. And an Internet investment banker who isn't affiliated with the deal says it makes sense for the company to go ahead with the offering despite the drop, even though DoubleClick appears to have plenty of cash on hand. (

Editor's Note: An investment banking source said Friday morning that the secondary was proceeding as planned, with shares priced at $90.25.


Embraceable You

Establishing a cordial, cooperative relationship with Michigan's attorney general, Jennifer Granholm, may be difficult for DoubleClick, given the unfriendly statement issued by the attorney general's office Thursday. Striking a tone reminiscent of an episode of

The X-Files

, the Michigan prosecutor attacks DoubleClick over actions that, rightly or wrongly, are standard practice for companies operating on the Internet.

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Granholm accuses DoubleClick of "systematically implanting electronic 'cookies,' or surveillance files, on the hard drives of users' computers without their knowledge or consent." Furthermore, says Granholm, "Every time you use the Internet, DoubleClick is placing a bar code on your back -- a user I.D. -- so that it can identify your interests, habits and preferences."

DoubleClick has 10 days to respond to the Michigan filing, or else it faces a lawsuit filed on behalf of the state's consumers. A DoubleClick spokeswoman says the company hasn't received notification from Michigan, but adds that "our company policy is to fully cooperate with governments and agencies."

Watching the Pennies

The Michigan filing is further evidence DoubleClick and other companies involved in Internet advertising are facing a thorny problem in balancing their desire for targeted, personalized marketing with the goal of activists, governments and others to protect individual privacy.

But a more pressing problem for DoubleClick is raising money in its secondary stock offering, which is tied to the company's fluctuating stock price. DoubleClick's stock, which fell to 97 1/16 from 106 3/4 on Feb. 4, the day the offering was announced, closed at 90 3/4 on Thursday, down 15 3/4 for the day and 20 11/16 over two days. That drop means that DoubleClick, which in a Monday filing estimated its net proceeds for the offering would be about $615 million, would net roughly $500 million instead (not including an overallotment option that could add another $100 million or so).

One banker unaffiliated with DoubleClick says in a situation like this, the company should proceed with the secondary rather than wait for the stock to rebound. "People are offering you money, and you should take their money," says the banker, speaking on condition of anonymity. As for the $100 million that the stock's drop leaves on the table, the banker advises against waiting for the stock to recover, even if the company is confident, like several analysts, that the privacy controversy will blow over. "Big deal," says the banker. The stock "is still a rich currency. You can't count pennies." Besides, he says, you have to consider the additional work required to relaunch the offering. "You've sucked up two weeks of management's time," he says.

Of course, says the banker, "if all of a sudden orders are coming out of the book because of this, then you have to think twice. But if the demand is there ... take the money."

Washing That Gray

But another banker says it's difficult for people outside the circle of DoubleClick and its bankers to weigh the risks and benefits of postponing the deal, because they don't have the relevant information that insiders have. "It's really hard to say whether they should or shouldn't move forward," says Robert Keller, head of the Internet banking practice at

Chase H&Q

, which isn't involved in the deal. Joint managers for the offering are

Goldman Sachs


Salomon Smith Barney


Ambiguity, such as that surrounding how DoubleClick will emerge from the privacy controversy, is not a good thing in volatile markets, Keller says. "The goal of any investment banker is to minimize the amount of hair on a deal when you're in the marketing phase of an underwritten public offering," says Keller. "In effect, all hair needs to be appropriately assessed and evaluated. ... What Goldman should be doing is evaluating how frizzy is this hair."

In DoubleClick's favor, the company isn't facing any apparent urgency to get its hands on the full $615 million it might have raised earlier this week. At the end of December, DoubleClick had cash and marketable securities worth $299 million on hand. Add the estimated $500 million it could raise at current prices, divide by the company's cash burn of $47.4 million in the fourth quarter of 1999, and you get a company that has enough cash for at least four years.