The IPO Diaries, Day Four: Momentum a Mile High

Posted May 10, 2006

Wednesday, May 12, 2004

Denver, Colorado

(Part Four of the IPO Diaries)

MOMENTUM A MILE HIGH

Folks,

For the first time today, our bankers started to use a scary word — momentum. It’s one of those dangerous words that politicians, CEOs, and coaches use when we know that things are going well, but we don’t really know why. It is one of those nasty ideas that many people believe is self-reinforcing, but can also quickly become self-defeating — especially if you believe in it. When I hear about momentum, I recall Benjamin Franklin’s admonition to "never confuse motion with action". So far, our IPO has produced a lot of motion. We would do well to not confuse it with action.

Our meetings are going well – some very well. The sales force of both investment banks are clearly excited by the feedback from investors. Only one investor out of 25 has so far given us a firm "no" (for those of you who

bet it was the guy who watches TV instead of reading,
congratulations). But we got this far thanks to the hard work and
smarts of a lot of people — not because of momentum. We are not yet
halfway done with the road show. We have more than 30 individual
meetings to do and at least two major presentations before large groups
of investors. I’d rather run scared than believe in momentum.

Nature reinforced the message yesterday. All month, Denver’s weather
had been building momentum towards a lovely summer. Then in three
hours, a perfectly balmy spring day dropped 51 degrees, producing snow
in the mountains and tornadoes on the flatlands. End of momentum.

We have plenty of reasons to run scared. The markets are down sharply; the Dow is below 10,000 for the first time this year. We are a small IPO sailing in large, choppy waters. Our small size is a big concern to investors and is the single largest reason that investors won’t meet with us. We have never made a dime of profits but have plans to grow spending – also a big concern. We operate in an unfamiliar and undocumented market that is currently being shaped by eBay and Amazon, with Google en route. Couldn’t we start a business that is a little less behemoth-infested? These things scare investors – and they should scare us a bit too.

The balance of the road show is shaping up pretty clearly. Milwaukee tomorrow (Milwaukee? We are meeting four funds there but not stopping in Chicago. Go figure.) Boston on Friday, Pennsylvania and Delaware on Monday, New York on Tuesday and Wednesday. After the market closes Wednesday, all bids are due. The Board Pricing Committee meets, and we see if we have attracted enough interest to sell some stock. If we do, the stock will start trading on Thursday. If not, I will be home mumbling the pitch in my sleep and warning of the dangers of momentum.

Marty

Go to Day Five of the IPO Diaries