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Wednesday, August 09, 2006

GoDaddy IPO Not Going, For Now

So GoDaddy.com pulled its IPO. Based on a couple of technology IPO floozies, this probably isn't a huge shock. It is evident that the market stinks when a big chip company has worse than a poor IPO pricing and the VoIP leader gets cut by more than half since its IPO. Verisign (VRSN) is the company that any domain registrant and web host HAS to compare to, and it doesn't take a rocket scientist to see that VRSN stock has been in the soup.

One of the buyer issues being tossed around is that the street really needed this company to post a net profitable quarter on a GAAP bais. This is surely a data point that may have some contention, but that is what we were told. Despite the positive cash flow, the street is starting to demand profits. We are just at that point of the business cycle and in what is starting to feel like a secular range-bound stock market.

Even the old Interland that now trades as Web.com (WWWW) is acting like it wants to trade into a lower trading band. That company still needs to be acquired, and would have generated nearly 200% profits for BAIT SHOP investors.

It is interesting that GoDaddy.com is generating this much cash flow. The company has its S-1 filing for a pre-IPO on what the company says is a ready-to-go basis, so if market conditions improve you will likely see a new re-filing and a much faster IPO process. The key here is going to be net profits first and revenue growth second.

We can speculate all we want as to just what the 'other" real reasoning behind this is, but the outspoken Bob Parsons discussed this on his blog last night.


Here are some excerpts from http://www.bobparsons.com/WhyIPOPulled.html


We just finished our best quarter – ever!
This decision comes after the best quarter in the company’s history. During this 2nd quarter The Go Daddy Group Inc. had GAAP revenue of $56,985,000, a net accounting loss of $733,000 and positive cash flow from operations of $14,240,000.

This compares to the 2nd Qtr 2005 when our GAAP revenue was $31,082,000, and we had a net accounting loss of $3,389,000, and positive cash flow from operations was $6,871,000.

As I write this blog article, our revenue numbers for July and August continue on this positive trend.

(more)

Why I decided to pull our IPO filing.
You might ask, why, if Go Daddy’s situation has never been better, did I decide to pull our IPO filing? There are three reasons for doing so:

1. Market conditions
2. The Quiet Period
3. We don’t have to go public

Market Conditions.
The state of the stock market for an IPO is as uncertain as it could be. In fact, the USA Today published an article that IPO stands for “Investor Pain Overload.” This is due, in large part, to the overall "bearishness" in the market.

Consider the situation from a global perspective and follow it all the way to Wall Street.
We 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.

In a bit of irony, last week when the SEC informed us our filing was accepted as being ready-to-go, market conditions were a terrible mess. In fact, inflation worries, say analysts, are bleeding into the tech sector. For all these reasons, I liken the timing of us getting the ‘green light’ to a person being told his car is in perfect condition just before it’s about to be driven into a wall.

I don’t expect market conditions to correct themselves for sometime.
I feel we owe it to ourselves to withdraw our filing until better and more stable times arrive
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