NorthPoint Communications
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NorthPoint Communications (Former NASDAQ: NPNT) was a CLEC (Competitive Local Exchange Carrier), focused on data transmission rather than voice. Its business plan involved leasing copper telephone lines from local phone companies, then selling them at wholesale prices to internet service providers, which in turn sold business and residential DSL service.
NorthPoint's stock IPO occurred on May 5, 1999 at $24 a share, with the ticker NPNT.
NorthPoint grew its business quickly, and was a darling of the dot-com boom of 1999-2000.
In a foreshadowing of future accounting scandals, NorthPoint stated its earnings for the third quarter of 2000, then restated them with more negative numbers than the original quarterly earnings report implied.
The earnings restatement caused Verizon to drop out of merger talks with NorthPoint that were originally worth $800 million, as Verizon claimed that the restated earnings showed an erosion in NorthPoint's customer base, and an unacceptable increase in their expenses and losses.
Lawsuit upon lawsuit then ensued. First NorthPoint sued Verizon on December 11, 2000, demanding that Verizon complete the merger process it began; then on December 21, an individual shareholder sued NorthPoint for its accounting malpractice and the subsequent collapse of NorthPoint's stock price.
NorthPoint filed for Chapter 11 bankruptcy protection on March 23, 2001 when it lost the ability to continue to pay its creditors. It then pushed to find short term sources of money to keep the company afloat.
By March 29, 2001, NorthPoint's financial foundation had collapsed, with no source of debt relief. The next morning, Liz Fetter, Northpoint President and CEO sent a letter to ISPs including the following statement:
"At this point it is clear that NorthPoint no longer has funds available to finance the continued operations of our network. As a result, I am hereby giving you notice that the cessation of services to our partners and subscribers and the complete shut down of our network will commence today."
This in fact happened. Over the course of the next several days, tens of thousands of end customers' DSL service terminated, with no 'life raft' or any grace period allowed for customers to move to a different ISP.
AT&T bought the physical assets of NorthPoint communications for $135 million shortly thereafter, effectively ending the company's existence.
