By Dominic Jones
A SCRAPPED IPO is rarely a good thing. It suggests the company being shopped is a lemon. Companies that pull their IPOs traditionally go off to some dark corner with their tails between their legs.
So when Internet domain registration company The Go Daddy Group, Inc. withdrew its registration statement with the Securities and Exchange Commission (SEC) on Tuesday, many observers might well have interpreted the news as Wall Street kicking another dog out to the curb.
But, according to company founder and CEO Bob Parsons, that would be a wrong assumption. Very wrong.
On his Hot Points blog, the outspoken Parsons lists three main reasons he, as GoDaddy’s sole current investor, decided to pull the IPO. They include:
- Poor general market conditions. Parsons mentions a soft market for IPOs, Middle East conflict, interest rate jitters and tech stock weakness.
- Lack of appreciation for GoDaddy’s cash generating power. Basically calling the financial media stupid, Parsons says the media ignored the company’s underlying performance and focused on the fact that his company had yet to report a profit under GAAP. “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,” says Parsons. The reason for the lack of accounting profit is that most of the company’s revenue and profit is accounted for over the term of domain registrations while most expenses are incurred up front. Says Parsons: “Slowly — because of the maturing of our domain name portfolio, and the eventual slowing of our growth rate, due to the law of large numbers, and the increasing revenue generated by sales of additional products that generate immediate GAAP earnings, we will report accounting earnings — under the accounting method that the AICPA insists we use. Incidentally, the IRS thinks all this is nonsense. They make us use the cash method.”
- GoDaddy is not desperate. Parsons makes the point that as the sole investor in his self-funded company, he is not answerable to venture capitalist or other investors under pressure to “flip” their investment. He says principals of tech companies that have recently completed their IPOs “during this difficult time” were forced to market by their venture capitalist investors. ” That’s not going to happen to Go Daddy,” he says.
Also in his post, Parsons pokes fun at the IPO quiet period requirements and the rules around forward-looking statements.
“If GoDaddy.com is anything, it is an outspoken company and I am an outspoken CEO. For us, the Quiet Period that came along with the IPO filing has been suffocating, ” he says.
Due to the quiet period, Parsons says he was forced to cancel his weekly radio show. He was back on the air the day after the IPO was withdrawn.
It is refreshing to see a CEO stand up for his company and his decisions, and explain them so clearly, moreover on a blog.
GoDaddy will be back looking to go public again in the future.
I, for one, can’t wait.