Youbet's financial woes grow

Youbet.com will need additional cash to continue operating following a decline in revenues during the third quarter of 2001, company officials said Wednesday.

The stock of Youbet, the computer-based horse racing broadcast and wagering company, plunged Wednesday 20 percent to 56 cents on the earnings announcement, its lowest level since May. The company said in a release that it has $5 million in cash and cash equivalents on hand after losing $3.7 million in the third quarter. The company has lost $9.3 million in the first nine months of this year.

Youbet officials said in a release that the company had revised a forecast for becoming profitable to the second half of 2002 "based on recent conditions," said co-chief executive officer Ron Luniewski. "In addition, we now believe that the company will need additional financing in order to accomplish this goal."

Youbet.com's former chief executive officer, Robert Fell, resigned on Monday. Following the resignation, Youbet.com's board of directors named Luniewski, the company's former chief operating officer, and former chief financial officer Phillip Hermann co-chief executive officers.

Youbet.com's financial difficulties are mounting at a time when several new account-wagering markets are preparing to open up. In California, regulators expect to have rules in place that will allow account wagering as of Jan. 1, and Massachusetts recently passed a bill that will allow telephone wagering if the legislation is signed by the governor.

In the third quarter, wagering by subscribers declined 16 percent to $18.8 million, compared with $22.4 million in the third quarter last year. Revenue of $1.1 million was a decline of 19 percent from revenue of $1.4 million in the third quarter of 2000.

Youbet officials blamed the Sept. 11 terrorist attacks and weakness in the economy. Wagering declined despite a marketing agreement with rival Television Games Network that allowed Youbet to begin taking wagers on formerly TVG-exclusive tracks such as Saratoga, Belmont, Del Mar, Arlington Park, and Lone Star beginning Aug. 30.

As Youbet struggles, a competing on-line based account-wagering service, AmericaTab, is picking up momentum. Officials for the company, which is owned by River Downs and Beulah Park and includes three affiliated websites - winticket.com, brisbet.com, and tsnbet.com - said that the company has 12,000 subscribers, double the number at the beginning of 2001 and nearly equal to Youbet.

Officials for AmericaTab said that handle through October this year on its three affiliated websites has been $20 million. The officials, who said the company is already profitable, credited their policy of not charging subscription or wagering fees for the strong subscriber growth numbers.