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You can't get something for nothing. And if you're in business, you don't give something for nothing, either.

That seems to be the message behind a recent

Securities and Exchange Commission

decision preventing business-to-business auctioneer



from recognizing revenue it got from its largest customer,



. And now, analysts say it's likely FreeMarkets won't be the only B2B company to hear from the SEC.

At issue is the fact that FreeMarkets gave Visteon warrants to purchase its stock at a nominal price when it signed up the auto-parts supplier as a customer. FreeMarkets has recorded more than $10 million in revenue from Visteon since then -- ostensibly for its auction services. But the SEC ruled the money should really be regarded as payment for the warrants, which were worth $95.5 million at the time they were granted.

FreeMarkets' B2B rivals could now be threatened by similar rulings, analysts say. Companies such as

Commerce One




are among several B2B firms that have given business partners warrants or straight equity as an incentive to make deals, says Patrick Walravens, an analyst at

Lehman Brothers

who covers B2B stocks.

In Commerce One's case, the revenue it gets from an agreement with


, the Big Three automakers' Internet exchange, could be in jeopardy, though the company contends it is not. PurchasePro has recorded more than $25 million in revenue through partners to whom it has granted stock warrants. On Thursday, it said it would stop offering stock warrants to partners.

Other companies could be at risk, too.

"In my universe, there has been plenty of opportunity for this sort of thing," says Lehman's Walravens. An SEC spokesman had no comment for this article, but referred to a

speech on the commission's Web site addressing the issue.

The deals that could face scrutiny typically involve an upstart services company that sought to make its name by landing a contract with a high-profile, Old Economy customer. The upstarts tended to sweeten their pitches for a deal by offering warrants whose value far exceeded the value of the contract. The services firms then spread the expense of the warrants over the life of the customer contract.

Services companies portrayed the warrants as inducements to get new partners to sign on. But the SEC apparently is taking the view that the Old Economy customers were motivated by acquiring soaring tech stocks through low-cost warrants, not by the revenue or savings produced by the deal with the services company.

That view took FreeMarkets by surprise, which now says others may be in for a surprise of their own.

"Until we got the comments, we did not know that the SEC had ruled, at least in their minds, that the accounting was inappropriate," says Joan Hooper, FreeMarkets' CFO. "My guess is that if there are other companies that have something similar to us, they're probably going to be in the same situation as we are. It's just that the SEC has not reviewed their case yet."

Commerce One is often mentioned as a subject for scrutiny, because of the combined 14% equity stake it gave to






last December in return for a revenue-sharing agreement with Covisint. The car companies got shares then valued at a total of $1.2 billion; in exchange, Commerce One was promised a slice of Covisint revenue.

"The Covisint-Commerce One deal, in that vein, is a very high-profile deal," says Doug Augenthaler, an analyst at

CIBC World Markets

who rates Commerce One a hold. "You've got to think

the SEC is taking a look at it." (His firm hasn't done underwriting for the company.)

Currently, best guess estimates are for Covisint to have revenue of $100 million to $200 million per year, and for Commerce One to get between 5% and 10% of that revenue. Because Commerce One's revenue is estimated at $685 million for 2001, a $5 million to $20 million writedown wouldn't be horrific. But the software company has several similar deals with other industry exchanges.

John Biestman, director of investor relations at Commerce One, says his firm's agreement with Covisint is structurally different from the FreeMarkets-Visteon deal. "We didn't give equity to Covisint, we issued it to GM and Ford," Biestman says. "That's a salient difference." has issued warrants to strategic partners such as

AOL Time Warner









Office Depot


. A PurchasePro spokesman declined to comment, but the company said

on its quarterly conference call Thursday that it wouldn't do similar deals in the future.

George Santana, an analyst at

Wedbush Morgan

securities who has a sell rating on PurchasePro and

wrote a detailed report about PurchasePro's warrant agreements earlier this month, sees a pattern. In that report, he charted more than $25 million in revenue that PurchasePro got through warrant deals. PurchasePro is projected to have $209 million in 2001 revenue.

"Whether it's questionable or not from FreeMarkets' perspective, they only did it with one customer," Santana says. "With PurchasePro, you could certainly make the case that this is a big pattern of warrants for revenue." (Santana's firm hasn't done underwriting for PurchasePro.)

Apparently, Commerce One and PurchasePro aren't alone.