Of Trying to Go Public — The Perils
NameMedia’s withdrawn IPO more painful than it looks.
It may appear that NameMedia’s decision the prior week to to drop its planned initial public offering is just a temporary setback. Aside from the costs of filing its S-1 to go public, going on the investor roadshow, and obliging quite period regulations, did it really cost the firm anything? The answer is yes. And it’s not the time, money, or decreased morale that hurts the most. It’s the disclosure.
By filing to go public, NameMedia’s competitor’s were basically handed the firm’s playbook. Competitors know how the firm operates. How much it pays key employees. How much debt it has and when it is due. And how much it paid for acquisitions counting Afternic, SmartName, and GoldKey. While some information in NameMedia’s S-1 filing was redacted, such as its payout percentage with Google, it still disclosed much more than any private firm would ever offer up.
NameMedia isn’t the first firm to file for and subsequently back out of going public. The Go Daddy Group, parent firm of GoDaddy.com, filed to go public in 2006. It’s filing included a wealth of insider information. In fact, it was the S-1 filing with the Securities and Exchange Commission that provided the definitive link between the firm and Standard Tactics. Trying to go public also stifled out-spoken founder Bob Parsons, who had to limit his firm talk during the so-called quiet period.
There are a handful of other public firms in the domain industry. They each have to disclose information regarding their operations that they’d prefer to keep private. We know how much Fabulous pays out to its parking clients. We have a good idea how much money Sedo makes from domain parking. And we know exactly how much compensation the CEO of Tucows gets.
This is information that competitors such as Oversee.net, Thought Convergence, and eNom get to keep private. And it gives these private firms a competitive advantage.
