GoDaddy Doesn`t Go to Wall Street - The Timing Wasnít Right
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Probably the biggest and most important reason given for not going ahead with the IPO is that the current economic climate isnít right. When USA Today can publish an article that observes, in effect, that IPO more accurately stands for Investor Pain Overload, you know this is not a good time to introduce your company to Wall Street. The Nasdaq, heavy with tech stocks, is down 6.6 percent this year. The same USA Today article observed that IPOs are down, on average, about two percent from their offering prices.
Bob Parsons sums it up well in his blog, starting with the global perspective. ďWe have war and escalating hostilities throughout the Middle East, with no end in sight. Oil prices are skyrocketing. Tech stocks, in particular, are once again taking a beating on Wall Street, due in part to some investment banks cutting their ratings on the U.S. technology sector. Rising interest rates have played a key factor. Their steady rise over recent months has put adverse pressure on stocks overall.Ē
And then, of course, there was the disaster that was the Vonage IPO. If you got in at the IPO price for that offering, you saw it lose nearly 60 percent of its value. Sal Morreale, IPO tracker for Cantor Fitzgerald, observed that ďVonage shook people up.Ē
This doesnít mean that profitable firms canít make it, but the market has been hugely bearish lately, especially in the area of IPOs. GoDaddy is hardly alone; so far this year, 37 IPOs have been pulled. At this rate, we may see more IPOs pulled this year since 2001. The tech market is particularly shaky; just a few days before GoDaddy pulled its IPO, bar-code technology firm Alien Technology also backed out of doing an IPO.
Itís not GoDaddyís fault that the market is uncertain right now. But the accounting practices the company is required to use donít exactly make them look good. According to their own books, they havenít turned a profit since they started nine years ago (more on that in a bit). Perhaps that makes potential investors think they resemble certain private-equity backed IPOs described by Francis Gaskins, editor of IPOdesktop.com. According to Gaskins, some of these companies are taken public by private investors who have piled debt onto the companies. These investors then use the IPO proceeds to take a dividend. Though thatís likely not the case with GoDaddy, these kinds of hazards make many IPO investors gun shy and a lot more picky than they have been in the past.
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