The Art of the IPO

Summer was not kind to Facebook. It was harsher still to Groupon and Zynga. All three companies are new to the public markets. If you were to look to their debuts only, you'd be forgiven for concluding that going public is a raw deal. Each of their stocks, to put it nicely, got hammered between Memorial Day and Labor Day--the US holidays that bookend summer. The Dow, during the same period? It rose 5%.

Going public is as much art as science. And as with any art, discipline and finesse make all the difference between masterpiece and flop. So for every Facebook, Groupon or Zynga, there is a LinkedIn, Zillow or Michael Kors Each entered the market last year. Today, all three have stocks that are up more than 100% from their offerings, more than 90% this year--levels of outperformance that every founder, CEO, management team, Board, underwriting group and investor hopes for from an IPO--keeping the romance of the stock market alive.

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Groupon: The Price of Hubris

When three-year-old Groupon filed to go public in June, market commentators dialed the outrage meter up to 10.

Flashpoints: an aggressive business model, creative accounting, and a track record of cashing-out early investors--to the tune of $1 billion. Further irritants: public puffery from the Chairman and the CEO during the so-called quiet period and August and September resignations of two senior team members--PR Chief Brad Williams and COO Margo Georgiadis--only months after they joined the Company.

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Monday's Miscellany

 

Fab.com is a daily deal site à la Gilt, targeting design aficionados. Launched less than two weeks ago, it truly is fab. Beautifully executed--naturally--it features a great mix of small items and serious investment pieces by household name and emerging designers, as well as small, regional artisans. Upcoming sales include mod furniture from Objeti, hand crafted New Moon rugs from Nepal and super-glam chandeliers from Avenue Lighting.

The other reason that the company is fab is that CEO and founder, Jason Goldberg, is an active practitioner of transparent management, and his blog posts, both pre- and post-launch, are a terrific companion guide to the site. They provide insight into the behind the scenes ins and outs of launching a start-up from a CEO who is clearly interested not only in building a great product but also a great company--and, so far, is hitting the ball out of the park.

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Take the Money and Run

 

Screwed.

Scammed.

Such delicious, outrage-inducing, front-page-of-the-NY Post-worthy words. Unexpected that they’d be used in defense of a company—LinkedIn, in this case, following its much anticipated, eye-popping public market debut on the New York Stock Exchange last week. And rather than emanating from the NY Post, the headlines came from former Wall Street analyst, Business Insider CEO Henry Blodget and New York Times Op-Ed columnist Joe Nocera.

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IPO Innovation

I’ve spent many of my spare moments over the last few weeks absorbed by speculation about the current state of the environment for and future of IPOs in the United States, especially IPOs of small, high-growth companies, broadly, and, more narrowly, companies for whom business is about more than just profits.

I’ve taken the opportunity to speak with a number of thought leaders in the space, as well with public market investors who day-in, day-out are active, trading in the market, seeing what’s working and what’s not for these companies in the markets today. And as I’ve researched, talked and considered, the US IPO market has continued its march back—in April more companies filed to go public than in any month since August 2007.

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IPO Stories

Successful IPOs are born of an ephemeral blend of engaging, compelling--and often lively--story-telling, an exceptional, seasoned management team, well-calibrated partners and advisors and savvy--and lucky--timing. Zipcar stirred together a perfect mix of each of those elements when it executed its $175 million IPO last week--more than two times the size initially anticipated when it first filed to go public last year in June--delivering healthy gains to investors in first-day trading.

And this week, hot on the wheels of the Zipcar deal, came the filing to go public by online residential real estate information provider Zillow. The ink is barely dry on the underwriters' check to Zipcar for its IPO proceeds. Zillow has yet to head out on the road to meet with investors. Yet it won't be at all surprising if six months from now a healthy follow-on offering hits the market from Zipcar, while Zillow has either been acquired, pulled its deal or is simmering along as a public company with a stock that is trading sideways.

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What IPO Crisis?

It’s time to debunk the myth that the United States' IPO market is in crisis, declining, in the ICU—or dead.

In February I penned a response to a gloomy New York Times OpEd that claimed, among other things, that the number of IPOs in the US is steadily declining. Since then this reality distortion has been repeated on the pages of the Wall Street Journal in an editorial forlornly titled Whatever Happened to IPOs. And it turns out that the Times and the Journal pieces followed on the heels of an alarmist January article written by well-known venture investor Alan Patricof entitled The IPO Market is Crippled—And It’s Hurting Our Country.

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Remaining Relevant

Felix Salmon is a finance blogger for Reuters. On Monday, on the eve of Deutsche Börse's official announcement that it would acquire the New York Stock Exchange, he penned a New York Times OpEd, dramatically titled Wall Street's Dead End. His thesis: the US stock market is on its way to irrelevance--and, by extension, we are too.

I see a handful of Felix's points: what the US market is doing (going up, right now) and what the economy is doing (going sideways) seem untethered. And our focus, really, needs to remain trained on the latter, not be distracted by the former.

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Fashion Forward

Late last week Prada announced plans to go public. Rumors had been swirling about an IPO for most of 2010--actually, for most of the past decade. The new twist to the tales told last year was that the Company had decided to list on the Hong Kong stock exchange. And that is, in fact, what it plans to do. This move is either brilliant--or sheer, high-stakes lunacy.

Prada has always been more modern, more futuristic and more willing to take risks--aesthetically, strategically and financially--than other luxury companies. There have been some ill-considered acquisitions and the burden, at times, of an overly leveraged balance sheet. On the whole, however, Miuccia Prada and her CEO husband, Patrizio Bertelli, have done a masterful job of staying relevant and at the forefront of luxury and fashion, while growing Prada from $450,000 in sales, when they took over the company from her family in 1978, to well over $2 billion in annual revenues today.

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