There was a brief article in the NY Times the other day on the fortunes of this year’s IPO market. Given that a couple of folks near and dear to me have an oar in this particular water, I read the article with some interest. Nothing substantial in it: this year’s better than last, the market for IPO’s is still jumpy, good offerings will do well. It kind of reminded me of an article I saw years ago on the financial pages somewhere or other, in which some magus predicted that the market would go up, go down, or stay the same. (Wish I could get paid a pundits wages…)
The article did, however, remind me that this week Genuity alumni celebrate that tenth anniversary of the company’s spectacularly failed IPO – the greatest failure in history, up until then, or so we were told. Definitely one of the worst IPO’s of what was a dot.bombingly dismal year.
Not that I expected to get rich-rich, but, like everyone else in the company, I spun out a bit of “what if” analysis.
After all, as a director, I had quite a few options.
And certainly, in that long-ago time, before the go-go years went going, going, gone, the expectation that the options could yield a modest gain of ten bucks per was not unreasonable. Sometimes I let myself dream even bigger.
Then there was the IPO itself, and the chance to augment those options with a bit of friends and family.
At first I dithered around about investing. Surely those options would be enough…
But then I decided – little miss goody-two shoes manager – that, as a director leading a large and growing team, I really had to show faith in the company. Over tea with a friend, we talked about what we were willing to risk, and we both came up with the not so magic number of $11,000. Which represented 1,000 shares at the favored nation, pre-IPO share price of $11.
A few days before we had to sign up, there was an article in The Boston Globe on the complexities of the Genuity offering. The company was an Internet Services Provider that had to be spun out of the parent company, Verizon, for some convoluted regulatory reason. The article warned, “This one’s for the pros.”
Well, the pros pretty much avoided it. We amateurs, on the other hand…
I can’t remember what the deal was, but I think you could purchase pre-IPO shares worth up to half of your income. An “opportunity” that a lot of my colleagues took “advantage” of.
For weeks on end, you couldn’t pass a fax machine without seeing an application for a second mortgage being sent. I knew folks who cashed in their kids’ college funds. One friend, who had taken a pass on a friends and family opportunity at AOL a few year earlier, wasn’t going to miss out this time. He and his wife both worked for Genuity, and they went for the max – an amount well in excess of $100K in shares.
The great day neared. Whatever the IPO’s outcome, it was slated to be The First Day of the Rest of Our Life as a company. Speculation about speculation was rife. But the unsettling under currents were starting to flow. Was the smart money in or out? Time would tell – and it did, along with the realization that the Rest of Our Life as a company would be nasty, brutish, and short.
We had to sign some type of commitment letter to purchase our shares, and the night before IPO day, agents from Smith Barney called to confirm the purchase.
When I asked what the offer was going to go out at, the Smith Barnoid gave me a figure that was less than what the company had told us it was aiming for. I asked whether this meant that the book had not been sold. Oh, no, she assured me. All was lookin’ good.
I’m not 100% sure, but I believe that Genuity got to ring the bell at the opening of the market on our day.
Talk about for whom the bell tolls.
I learned a lot about non-verbal communications that day.
By noon, no one needed to say word one.
Those who had gone big were the gaunt, gray-faced, ones cradling their heads in their hands. The ones looking relieved had missed the call from Smith Barney to confirm their purchase and were, as it turned out, off the hook, even though they’d signed a commitment letter. The folks trying not to smile were the ones who had taken a pass. For them, this was a win-win. They didn’t lose a dime, plus they didn’t have to eat their hearts, livers, and spleens out while those of us who had paid to play got rich.
Which, of course, would have taken at least six months, since that was the amount of time we had to hold our shares. We might have known when to fold ‘em, but we were required by law to hold ‘em.
We all knew from the opening bell that we’d been gonged.
Trading opened at $11 and proceeded to drop from there. Six months in, I believe the price was approaching zero.
In keeping with the Genuity tradition of over-the-top spending, there was a Big IPO Party planned for late that afternoon, out on The Quad. Champagne, nice eats. And a goodie box to help us commemorate the day.
The boxes held a fleece (how fitting) blanket, an IOU for the polo shirt that was still on order, an instant camera that produced pictures on stamps, noise makers and, even more fitting than the fleece, brightly colored nylon fools caps.
We were all supposed to don our gay apparel, blow on our noisemakers, snap candids of each other celebrating (and wear them on our sleeves), and drink champagne toasts to our good fortune.
Well, that didn’t happen.
Worst, they started to run low on goodie boxes and, in a scene that recalled the Vietnamese leave-behinds grasping at the struts of the last helicopter to take off from the roof of the American Embassy in Saigon, employees – fearing they wouldn’t secure a goodie box – stormed the dwindling goodie box pile. The marketing folks – all young women who worked on events and tschotkes – tried to hold back the rabble, or at least limit the take to one per person. Good luck with that, ladies. Boxes were flying over head, and employees were scooping them up and running off, arms full.
This scene topped what was a generally – no surprise here – dispirited event. Our execs tried gamely and lamely to rally the troops. (“Turning this around is in our control…”) But soon enough we knew why our CEO looked so stricken. Alone among senior execs, I believe, he had a million dollars worth of skin in this particular game.
Which, of course, didn’t make him immune to the employee grumblings that they’d been unconscionably, even immorally led astray by senior management’s pushing the IPO.
Back at Party Central, I sipped a bit of champagne with a colleague who’d gotten his wife’s family in on the friends and family. “My father-in-law didn’t like me to begin with,” he said ruefully.
By Day Two, I’d assessed the lay of this particular land and announced that there weren’t enough office supplies in the cabinets to make the losses up to employees. We were all just going to have to suck it up.
I can’t remember whether this was the end of the beginning, or the beginning of the end, for Genuity. It could have been both.
Fortunately, our drunken sailor on shore spree days weren’t quite over yet, so I was able to more or less recoup my $11K investment.
That happened the next spring, when I was one of 50 “iLeaders” (don’t ask) invited to join the sales winners circle on their awards trip to Hawaii. One week in paradise, no expense spared, don’t even need to take vacation days? Even the presence of the sales team wasn’t enough to negate that deal.
When I toted up what it must have cost the company to send me and my sister Trish on this jaunt, it came out to be just about $11K (tax free because we all attended one bogus, half-hour breakfast meeting at which a couple of sales winners talked work).
Given the capital loss I was able to take on the $11k stock purchase, I even came out ahead of the game. Who said this IPO was for the pros?
Anyway, all this happy anniversary stuff came to mind when I read about this year’s crop of IPOs.
I wish them all (well, maybe not Booz Allen) the best of fortune – especially the one my near and dear are involved in.
Genuity, of course, is long since gone, living on in the Genuity backpack I carry my laptop in. I use it proudly enough, especially since most people no longer remember anything about its debaclish run as a company. In fact, a couple of months back, while waiting to board my flight to Paris, I was tapped on the back by an old friend from Genu days. She was heading to Paris on business and, sure enough, she was lugging her laptop in her trusty Genuity backpack. Like me, J had been on the Hawaii winners trip. That, plus the nifty backpack? Whatever she had invested in the Genuity IPO, at least she got some of it back…