GoDaddy Doesn`t Go to Wall Street - Doesn’t Need to Go Public, or to Lose Control
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One of the major points that Bob Parsons made in his blog post is that GoDaddy has just had its best quarter ever. It had revenue of $56.9 million, a net accounting loss of $733,000, and positive cash flow from operations of $14.2 million. The SEC had just accepted the company’s IPO. And its domain name portfolio includes 14.6 million registrations, more than twice as many as its next largest competitor. “So thanks to all of our wonderful customers,” Parsons explained, “about 1 in every 3 domain name registrations are now made with GoDaddy.com.”
Given that all of these factors are going for GoDaddy, Parsons feels that the company doesn’t really need to go public. He pointed out that many tech companies have gone ahead with the IPO process because they received significant start-up money from venture capitalists, who then forced them to go public because the venture capitalists “need to flip their investment to show a gain for whatever fund it is they are managing. If the underlying company takes it on the chin as a result, then so be it.”
Bob Parsons then pointed out that he is the only investor in GoDaddy, so there’s no pressure to go public. But there’s something deeper going on here, which I think can be glimpsed if we look at his complaint about journalists covering the IPO. To explain the background: GoDaddy is forced to use a particular accounting method that is “ultra conservative” and therefore doesn’t show how truly profitable it is. Income on domain names is supposed to be shown as if customers pay for them monthly, rather than all up front. According to Parsons, this means that GoDaddy has to defer its profits, and this net deferred revenue adds up to many tens of millions of dollars.
Parsons maintains that he “was surprised that not one journalist took the time to look at our cash flow statement to report our actual results. Instead, each and every one of them hastily reported that GoDaddy filed to do an IPO and that we had never turned a profit. Not one of them took the time to look at our cash flow statements to see that we generated significant operating cash flow during each reporting period.”
So Parsons has said that he’ll “stay ‘Master of My Own Domain’…for now.” Looking at just these statements, this is a man who is used to being in control, and wouldn’t give it up easily. Giving up a certain degree of control is almost unavoidable with an IPO. At the very least, when your company goes public, the books are open to public scrutiny – and given his reaction to journalists’ admittedly hasty analysts, how would Parsons react to shareholders and their legitimate questions? Certainly, Parsons has steered his company well, and will probably continue to be successful. But don’t expect that success to be assisted by an IPO any time in the near future.
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