NameMedia’s withdrawn IPO more painful than it looks.
It may appear that NameMedia’s decision last week to to drop its planned initial public offering is just a temporary setback. Aside from the costs of filing its S-1 to go public, going on the investor roadshow, and obliging quite period regulations, did it really cost the company anything? The answer is yes. And it’s not the time, money, or decreased morale that hurts the most. It’s the disclosure.
By filing to go public, NameMedia’s competitor’s were basically handed the company’s playbook. Competitors know how the company operates. How much it pays key employees. How much debt it has and when it is due. And how much it paid for acquisitions including Afternic, SmartName, and GoldKey. While some information in NameMedia’s S-1 filing was redacted, such as its payout percentage with Google, it still disclosed much more than any private company would ever offer up.
NameMedia isn’t the first company to file for and subsequently back out of going public. The Go Daddy Group, parent company of GoDaddy.com, filed to go public in 2006. It’s filing included a wealth of insider information. In fact, it was the S-1 filing with the Securities and Exchange Commission that provided the definitive link between the company and Standard Tactics. Trying to go public also stifled out-spoken founder Bob Parsons, who had to limit his company talk during the so-called quiet period.
There are a handful of other public companies in the domain industry. They each have to disclose information about their operations that they’d prefer to keep private. We know how much Fabulous pays out to its parking customers. We have a good idea how much money Sedo makes from domain parking. And we know exactly how much compensation the CEO of Tucows gets.
This is information that competitors such as Oversee.net, Thought Convergence, and eNom get to keep private. And it gives these private companies a competitive advantage.