Former dotcom darling Adultshop.com.au set to sell online retail business, merge with brothel owner

Online sex toy retailer and dotcom survivor Adultshop has announced it will sell off its online retail business and merge its operations with a Sydney brothel and escort agency operator.

Adultshop, which is one of the only online retailers listed on the Australian Securities Exchange, was one of the original breed of Australian dotcom players.

It listed in 1999 and had a market capitalisation of $600 million at the height of the dotcom boom.

But despite the company’s early success, mounting losses and poor performance has seen the company’s market capital sink to about $5 million.

The directors of the company, who own around 40% of the business, have been trying to look for ways to turn the company around for the past year and have examined options including restructuring the business or selling the listed shell to a company in a better-performing sector, such as mining services.

In December last year, managing director Malcolm Day fended off a takeover offer from Melbourne-based sex shop owner, Sexy Land.

Adultshop’s new deal will see the company spend $20 million to acquire a Sydney brothel called Stiletto from brothel and escort agency operator Blackfeather.

Adultshop will then raise $10 million from sophisticated and professional investors, before launching a share buyback that will allow investors to exit the struggling stock.

Day will then buy the company’s retail business – which includes the online sales portal and 18 retail stores – for about $1.487 million.

Day, who owns 27% of the company, was unavailable for comment this morning. He has not indicated whether he will sell his stake into the share buyback.

Adultshop says it will retain its wholesale division, called Calvista.