Answers Corp. (NASDAQ: ANSW) stock got smashed on Friday, dropping more than 23%. The company that via Answers.com provides users with answer-based search services and also operates Wikianswers.com, which is a Q&A platform where users ask various questions and a community of people answers them, is having all kinds of problems trying to finance an acquisition of Lexico, owner of the Web properties Dictionary.com, Thesaurus.com, and Reference.com.

Answers planned to buy the company for $100 million, even though Answers had just $9.2 million in cash at the time of the announcement. Skeptics, like my IOI partner, Zack Miller, just looked at the numbers and wondered how this deal was going to be financed, and it appears that they were correct to be skeptical. Since the announcement back in July, Answers stock is down over 65%.

In a note on Friday, paidContent.org referring to the deal financing said, "a plan to sell 14.94 million shares, raising $100 million. But that was based on the company's Tuesday closing price of $6.69. Since then the stock has been crushed, falling nearly 42 percent to $3.96. At this level, 14.94 million shares would only be worth $58 million, not nearly what it needs to raise to fund the buy. At these prices, the company would have to up the offering to 25.6 million, further diluting the value held by the company's current shareholders."

It looks like if this deal gets done, and I have my doubts that it will, investors are going to see lots more red, as the stock looks like it will be heading much lower.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position long or short in any stock mentioned as of 1/20/08.

According to The Global Language Monitor, there are 988,968 words in the English language. Yesterday, Answers Corp. (NASDSAQ: ANSW) paid $100 million for Lexico Publishing Group LLC, owners of the internet's most used dictionary, Dictionary.Com. Thesaurus.com and Reference.com were also included in the deal. The company will sell off $140 million of its stock to cover the cost of the purchase.

Answers Corp. is attempting to become the go-to advertising-supported free reference site on a far-flung body of topics from Supreme Court decisions to Bible lexicon, company histories to travel guides. To differentiate itself, its strategy is to aggregate branded, authoritative, content from companies such as AccuWeather, Thomason Gale, Britannica, and Barron's.

They are also pursuing the user-generated content market that Wikipedia established with its recent purchase of Wikianswers.com. In total, Answers.com averaged 4.86 million queries in the first quarter of 2007, from which it realized revenue of $2.9 million and a GAAP loss of $303 thousand -- not a great foundation for a $100 million purchase.

Dictionary.com and its ancillary brands seem like a perfect fit for the company's strategy, though. The overriding question is the validity of this strategy. While the notion of driving people to a web site for one piece of info is so 2006, Answers Corp. seems like the perfect company to take advantage of widgets to extend its market presence, and the value of baseline domain names such as these should remain high.