To: BooKooCabbage who wrote (351 ) 4/4/2000 6:27:00 AM From: Puck Respond to
Consider Akamai's case. Akamai has 93 mil. shares outstanding and sold 9 mil. in its IPO. I have been an investor in SafeGuard Scientific, a company that has been incubating technology companies for two decades--long before it became fashionable. Until the last year or so they had a shareholder rights policy whereby their shareholder were offered substantially all of the shares in their spin-off IPO's, which were conducted without big name underwriters. A year and a half ago, they began to focus on b-to-b internet commerce. Because of the nature of the current technology stock marketplace, SafeGuard management determined that having well known analyst coverage was paramount in attaing the post-IPO valuations they desired for their spin-off companies. In order to attract the Goldman Sachs's and Morgan Stanley's of the world they had dramatically cut the number of shares they desired to issue their shareholders in order to satisfy their underwriters, who, as you say, want control over most of the shares offered. If SafeGuard Scientific owned Mirror Image and were spinning it off, SafeGuard shareholders would get to purchase shares in a 1 MI for every 10 Safeguard shares ratio or worse. Essentially, the underwriters would want to be able to sell 13 or 13.5 mil. of a 15 mil. underwriting. It would be in all of our interests that the Vik's forgo Goldman Sachs and just do shareholder rights offering to raise IPO proceeds. The price wouldn't be as high initially, but if MI did well, money would definitely find it. A benefit would be in executive recruitment. MI options would have a much greater potential appreciation in its early life as a public company than Akamai options ever will. I believe the valuation would come, it would just take a lot longer. It's a lot better than having to turn over 90% of your IPO shares to Goldman Sachs, if shareholder value is truly foremost in their minds. I hope the Vik's have the toughness to stand up to the underwriters because any big name underwriter will want every last share it can get. Check out SafeGuard's shareholder rights policy for yourself and see how little SafeGuard shareholders now get to participate in IPO's. The price of getting a Goldman Sachs to handle your IPO is too high, in my opinion.
