WorldSpace Stumbles

When NeuStar went public this summer, it was not for the usual reason of raising capital, but rather to cash out Warburg, other investors and company insiders. They got all of the almost $700 million generated by the stock sale.

Investors sometimes are leery about deals that generate no money for the company going public, but they were eager enough for NeuStar that the offering price was raised at the last minute. Instead of selling for $18 to $20 a share as first proposed, the stock went public at $22.

Since the IPO, NeuStar has attracted a strong following on Wall Street. The stock gets a "buy" rating from eight of the 10 analysts who follow the company.

In contrast, only two analysts are following WorldSpace, and the only one who rates the company "buy" is at UBS AG, the Swiss-owned investment firm than managed the WorldSpace IPO.

WorldSpace is smaller and slower-growing than NeuStar and has lost $2 billion since it was founded. Last month it reported second-quarter revenue of $2.3 million -- up 21 percent from $1.9 million in the comparable quarter last year -- and a loss of $22 million, compared with a loss of $52 million.

An unknown factor in the decline of WorldSpace stock is concern about two of its longtime investors -- Salah Idris, the owner of a plant in Sudan that the United States bombed in 1998 alleging that it had ties to Osama bin Laden, and Khalid Bin Mahfouz, a banker who settled allegations in the Bank of Credit and Commerce International scandal in the early 1990s and has since been accused in a lawsuit of backing bin Laden financially. In a filing with the Securities and Exchange Commission before the IPO, WorldSpace said that the two investors "have repeatedly denied all such allegations" and that they no longer have any "voting control rights" in the company.

WorldSpace has declined to elaborate on the unconventional investors. And, like most companies, it does not comment on its stock price.

Friday, in response to an inquiry, Judith Pryor, senior vice president for corporate affairs, said in a statement, "WorldSpace is pleased to have completed its successful initial public offering during Q2 2005." She added that it is "the only company positioned to offer [satellite radio] in its target markets of China, India and Western Europe.

"We are excited about our business and position," she said, "and will continue to execute against our strategic plans."

Jerry Knight can be contacted atknightj@washpost.com.