Minimum bids, asset purchase agreement, and 10% deposit required by February 25.

In the continuing saga of Toys.com, a new auction will be held February 27. The domain name was originally won at a bankruptcy auction earlier this month for $1.25M by Faculty Lounge Partners. However, another party indicated it may be willing to pay more for the domain name.

Faculty Lounge, of which domain name lawyer Ari Goldberger is a partner, will be the stalking horse bidder for the auction. If Faculty Lounge does not win the domain in the new auction, it will be paid a break up fee of approximately 3% of the sale price in addition to its legal fees.

New bidders will have to top $1.25M plus the stalking horse fees, so I estimate the minimum price would be about $1.35M. To participate in the February 27 auction bidders will need to submit an initial bid and 10% deposit by February 25. That means a typical deposit will be about $135,000. As of the time of writing, no formal bids have been received, but creating an asset purchase agreement generally requires substantial legal work.

Two sales from the original domain name auction have been completed: eToys.com and related domain names to Toys ‘R’ Us, and Birthdays.com and related domain names to DONE! Ventures.

© DomainNameWire.com 2009.

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NameMedia provides data on the SMB end user market for domain names.

Earlier this month I reported that the median sales price for domain names at Sedo last year was $500. I pointed out that this number represents a mix between end user sales and investor sales.

If you’re looking for a better number for the small and medium business end user market, look no further. NameMedia, which focuses on the SMB end user market through BuyDomains and other market channels, provided data to me showing a median price of $1,200 for 2008.

NameMedia focuses on domain names in the $1,000-$5,000 range, which it feels comfortable it can sell to business owners. Given that businesses typically use domain names for at least five years, NameMedia is suggesting making an investment of $200-$1,000 per year for a better domain name.

NameMedia Senior Vice President and General Manager Peter Lamson told me this number is holding steady, and sales in the first quarter of 2009 are still running at a $1,200 median price.

The company sells domain names through its BuyDomains and Afternic sites, as well as through listing arrangements with domain name registrars such as GoDaddy . It advertises in a variety of end user publications and web sites, and offers seminars (some of which aren’t directly related to domains) to SMBs. I know of no other company that targets this market better, and the company racks up millions of dollars worth of sales to this market each month, typically $1,200 or so at a time. In other words, this number is a fairly accurate picture of the market.

Domain owners can list their domains on BuyDomains, Afternic, and several other NameMedia partners by choosing the “expanded promotion” option when listing domains at Afternic.com.

© DomainNameWire.com 2009.

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Toys.com will be auctioned again; Faculty Lounge will be stalking horse bidder.

Domain Name Wire has learned that the sale of Toys.com has been halted by the bankruptcy court and the domain name will be auctioned again. Faculty Lounge, the company that won the domain name at auction earlier this month, will be a stalking horse bidder in the auction.

Eli Columbus, a shareholder in Winstead PC’s Business Restructuring/Bankruptcy Practice Group (which is not involved in the case), explained that a stalking horse bidder typically sets the floor in an auction, and typically receives additional rights in return.

“You have a bidder committed to buying an asset at a certain price,” said Columbus. “They’re setting the bar. The benefit to the bankruptcy estate is you know you have a buyer at a certain price, and it generates some interest.”

If Faculty Lounge doesn’t win the domain name in the new auction, it will likely receive some sort of compensation. “From the stalking horse bidder perspective, there are typically some incentives in the auction procedures,” said Columbus. “A lot of times the court will approve a break up fee if they aren’t the successful bidder. This usually covers at least the stalking horse bidder’s fees. In some cases the break up fee will be a percentage of the sale price.”

Bankruptcy courts sometimes block asset auction sales if they believe the assets weren’t marketed in a way that achieved the highest results. As I wrote in an article yesterday about DONE! Ventures’ purchase, I’m not surprised that there has been a challenge to the Toys.com sale. Few companies knew about the eToys auction, and the prices on some of the domain names were well below market prices.

© DomainNameWire.com 2009.

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