Admittedly, on any given day, I don’t pay a lot of attention to the stock market. That said, I noticed this morning that five companies, across a wide band of industries, chose today to launch their IPOs. There was a sixth one that pulled out at the eleventh hour, but we’ll get to them later. The five newly minted stocks belong to a drug maker (Versartis, VSAR), a network software play (A10 Networks, ATEN) , another technology company (Amber Road, AMBR), a finance company (TPG Specialty Lending, TSLX, and an e-commerce platform provider (Borderfree, BRDR). Each leverages new technology, innovative thinking, creative applications, and a clear focus on the customer.
Not surprisingly, the investment community reacted overwhelmingly positive to the offerings of all five, sending their prices spiraling up, as subscribers exceeded shares available, and the laws of supply and demand took hold. It is on days like this that I am reminded why we are in business. The companies that demand more of themselves than their customers do, the ones that challenge their paradigms and get outside their comfort zone, and reinvest consistently, appropriately into resources, both technological and human, are the ones that will stick. They possess what it takes to achieve a solid, enduring relationship with their marketplace, and they stand create value, for their customers and their shareholders.
Having read the prospectuses for at least two of these companies, I was encouraged by what I saw. They have a clear, distinct and market-centric leadership vision… They know what they are in business to do, and they have carefully managed their funds to date to provide them with a runway to profitability… They have invested in things of substance, like innovation, people, and the community they live in.
I mentioned earlier that there was one company that decided, on the eve of its public offering, to pull out of the process. I had to wonder: Could it be that the very forces that propelled the other five companies to success, when inverted, became the detriments of this one, failed attempt? If innovation, creativity, market focus, and fiscal conservatism, are turned inside out, what do you have? The opposite of innovation is to be a commodity provider, lagging in thought leadership and execution. What is not creative is by definition stale. Firms that lack a tight focus on their marketplace will demonstrate that they are short on new ideas to be harnessed and adopted by their customers. And, as we have seen so many times, especially with the memories of the “dot com” bubble, financial shortcomings can lead to all sorts of maladies, including organizational death or corporate dismemberment.
The one company that could not launch today, a reseller of retail gift cards (Globoforce PLC) may be analogous to what it means to swim inside a riptide. There are very few ways to survive in a fast-moving current, especially when you lack the skills necessary to save yourself.
Buying a product at retail (in their case, a gift card or gift certificate), marking it up 30-50% from its face value, and selling to corporate customers for employee gifts, is notably short on the scale of innovation and creativity. Lacking any unique or patented technology that affords the buyer something that they can’t get from any number of alternative sources, is not exactly a recipe for success. Ask JCPenney or Kmart about that.
One would have to question where the market focus is here. And, having read their prospectus, the financials of this company would leave one scratching his head as to why the savvy investor would willfully participate in the offering at all. With short-term obligations far in excess of liquid assets, the balance sheet is unattractive to the point of questioning why anyone would choose to have it published for scrutiny. Marketing will only go so far. At some point the numbers have to be there.
Instead of needlessly pondering the vagaries of one failed launch, I would far prefer to hoist up an Irish brew and toast the five wonderfully exciting and invigorating companies that set a new course for themselves today. Congratulations and a hearty “Cheers!” to all.
Hugh MacLeod, whom you have seen me quote on many occasions, famously said, “The market for something to believe in is infinite”. I believe this is true on many levels, from the spiritual to the pragmatic, and particularly so in the investment community. It’s what has made the capitalist system work, and has elevated many great inventors and tinkerers to positions of national prominence. Here’s to those who toil, ceaselessly, to be the best there is!