Going public: 18-24 months?

We haven't discussed the part of the Reuters CEO story that confirmed that LL's game plan is to eventually IPO (see quote below). To have Bill Gurley mention "IPO" to the press is sort of like inviting Goldman Sachs in for lunch.

I think this should put an end to the recurring anxiety/hopes re:LL getting acquired by Google or anyone else. They'll be looking for a CEO that can take them public. So we should expect the CEO to come in with a team, quickly grow the company, bring them more in line with standard business practices, and diversify LL's product offering (that is, make the platform part of the business a reality with stabililaztion, open interoperability solutions, etc.).

Thoughts?
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i don't know, with the adult side allowed i don't see too many companies jumping at the chance.

Some of us have very poor grasps of business stuff.

Mentions of IPOs and stocks and such things is kind of like UV mapping , my brain doesn't like the terms and wants to find something better to do.

So, going public means selling stock, having stockholders meetings, what?

Playboy?

If they do go public, one thing that should happen to make paid residents happy, is all premium account holders should automatically get some stock shares in LL proportionate to how many months they have paid for their account and also how much land they have paid for and "owned," whether mainland or even renting estate land from estate owners. Afterall they have been the investors in SL.

Oh... GAWD help us. If you think customer service is bad now, just wait until it is all about short sighted, I want it now, padding of shareholders' pockets and to he** with the long term health of Second Life and its residents.

I don't think these comments make sense given because it's not being purchased by another company that is being considered, is that right?

"Not in the next 12 months" means "no plans to do that at all, we're keeping our options open but we don't think we'll do it unless something huge changes". 12 months is an eternity in this world.

Going public means that Linden Lab will have the ability to sell stocks and bonds to raise cash. However, it also means that there's a whole bunch of financial information they'll be required to disclose on a regular basis to the SEC.

Following that logic I should be getting dividends from Ford Motor Company, General Motors, Wal Mart, Exxon Mobil, Edison International and many others since I pay or have paid a fairly good sum of money to them in the past. That "investment" you speak of is actually a payment for a service or product just like what we do when we buy a car, a gallon of milk or gasoline, or pay our electric bill........we are not "investing" capital (or stock) into the company.

Going puiblic, should LL decide to go that route, will most likely bring about some of the changes we all have been screaming about for as long as I've been visiting these forums. It will, also, likely bring about some changes that we won't be completely happy about. But, either way we will probably endure........or something else to come along to give us an alternative.

So, yeah, it sky will fall.......on some of us. Just duck!!!

And what are the ramifications of that?

The obvious ramifications of that is that we (as the public) will also have the ability to view and study those figures. Of course interpetation of those numbers would still leave doors open to arguments about LL's financial business dealing.

Sorry for kicking off the discussion and disappearing. "Going public" in this case would be an initial offering of stock for Linden Lab on the NASDAQ stock exchange. Once the IPO is done, anyone could buy or sell shares in LL.

I doubt LL would offer any stock to premium or other members at a discount (or free); in fact, doing so probably would be a legalese nightmare I think the best one could hope for, in the way of special treatment, would be a public auction ala Google, where at least little fish would be ABLE to buy IPO stock. Generally speaking, for a "popular" company, it is impossible for small traders to get any stock in the first days of trading, unless you do something like Google's "Dutch Auction".

Of course, at any time, LL could simply give Premium members $L in any amount. Their world, their printing press

Ordinal, perhaps you're right, a year is a long way away. I guess what made my ears perk was this being mentioned in a press release dealing with choosing a new CEO. In this climate, if they don't choose a CEO who has successfully taken a company public before, their chances of having that option in 18 months or so would be greatly decreased. It takes about a year of very focussed planning to go public.

Once they do go public, they would be subject to the tyranny of public scrutiny of their quarterly results. Miss a quarter's revenue prediction, and the stock value tanks ... your shareholders get unhappy and begin demanding change ... tyranny!
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right, i did mean shareholders, but when you think about it a shareholder will also be someone or somethings who want a buy out option eventually. opening yourself to going public is also making yourself available to potential takeovers.

so thinking about then maybe it's a good thing


comment about another post:

i think the premium shares idea is a great idea

I'm guessing the thought was that adult content might make institutional investors wary of buying big blocks of shares, possibly making it harder to get the offering sold quickly and at a good (for LR) price.

Playboy does trade on NYSE and Penthouse also happens to be gearing up for an IPO at the moment, so I think we can dismiss the notion of an IPO naughtiness barrier.

You don't go seeking public funds until you need 'em, *and* you can basically say: "Stick a fork in it it's done! Our way forward is sooo clear and we can entrust dividend-hungry hordes of stockholders to support our vision..."

Right now, I think a truly lasting vision of cyberspace won't converge with the short term interests of money-firsters... for at least a decade.

Short term thinking will bring all kinds of fail to what is essentially a visionary's dream.

Oh I agree. Subjecting LL to stockholder tyranny could be ruinous. And LL itself right now doesn't need to buy anything immense enough (like another good-sized company) to have to go public to do it. In 18months-2years, I'm not so sure.

Basically, I'm a pragmatist, Des. I think the statement above is true from LL's point of view (not that anyone would ever expect them to pay dividends, lol! growth stock ONLY), but I'm not confident of LL's investors sharing that view. I'm sure Mitch Kapor does. I don't know about the others.

In my experience, if you're in a privately held company chugging along happily and the majority equity holders decide they want their 4-10X profit NOW, guys in limos and black suits show up shortly and a year later, you are sold or your IPO is done.

If Kapor and Rosedale have a controlling interest in the company, then yes, they can take as much time as they want (tho they may feel compelled to buy someone else out at some point). If not, there may be pressures to IPO that LL cannot resist.
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I think this is the 2nd time that a statement like this has been planted in the press.

In late 2006 David Fleck told the FT;

"We’re open to an IPO or a sale, whenever that occurs. But there’s no rush."

Looking for patterns (mostly from thin air I'll admit )

The 2006 statement came in the same year as a high profile appointment of a new CFO, and the completion of an $11million financing round.

The 2008 statement comes at the same time as a very publicly announced recruitment drive for a more business savvy CEO, a period of slowing growth and a flurry of negative press and industry sentiment.

Without access to some current financials, it's difficult to judge the current state of LL's cash situation, or where their investors are in terms of exit strategies.

It might just be me, but the current jittery market (that's me being generous!), and the continuing potential for an extended downside over the coming 12 months, makes an IPO look unlikely for LL even if they were in good shape.

Intuitively, it looks to me as if the CEO announcement and the IPO story might simply be some investor handholding and possibly the start of a new investment round.

Both statements will reassure current and potential new investors. They provide assurance of a steady hand at the wheel with a focus on operations and fiscal management, while the IPO statement gives a clear indicator of where potential returns and profitable exit might come from.

Just my feelings..

The time frame of the OP was 18-24 months ... Gurley explicitly ruled out anything within 12 months. Which, as you point out, is simple prudence.
THAT is a very interesting thought.

It takes a lot of preparatory work to float a company successfully and 12 months time scale is not a long one. The timing of a public offering is also crucial - the market needs to be ready for it.

You need to ask why do companies go public and what reasons apply to LL?

- do they want to raise money to expand the business?
- do they want to protect the company from a hostile buy-out?

There been rumors for a long time about take overs,buyouts etc. But really business sence tell you nobody will deal with past issues LLABS had in the past. Besides going public means releasing data which at times hasnt been all true.

Thank you Desmond, you said it sooo much better than my rant above.

I can understand where you are coming from Desmond as you have built a good business from virtually nothing within SL. In particular I was impressed by the latest more or less completed Caledon project, an estate wide railway system of which is a delight to ride on and see, of which is more or less unique within estate land in SL.

But I think you may be thinking a little short term yourself here. I can understand what you now crave is stability on the platform with an absence of revolutionary change. That enables you to plan ahead and slowly and cautiously expand and consolidate your business.

However there are some aspects of SL that have radically changed over the last year or so. Some like the age play and financial services ban I would support. But for example the gaming/gambling ban is unfair to the majority of us who are non-Americans, and do not share the USA's somewhat puritanical attitude to gaming in general, and its removal has damaged SL’s economy.

That problem could be overcome by either separate shards of SL or UK/Gibraltar based servers, which may only happen with new capital input.

There are other issues I could think of too, such as high performance Sims running on super computers for real life corporations prepared to pay for that added enhancement. I was also reading some detailed stuff from IBM recently which discussed real time processing in virtual worlds and code enhancements possible. For example, when I go online to my stockbroker to trade, the transaction is almost instant, despite my computer and the broker’s asset servers handling streams of constantly changing information from all over the world. That is not a lot different from what happens “under the bonnet” at SL, but would require big code enhancements to speed up to match first life

These are just a few examples of potential improvements, all of which will need capital injection

Finally, I took a cautious look at the various SL emulators following on from a debate with Pie here on Friday. (Pie if you are reading this you may have been partially right after all)

This site http://www.openlifegrid.com/ in particular gave me pause for thought. They are only at version 0.5 and they have a stable web page, a pretty good viewer, and the virtual world inside is far more stable and feature enabled than I would have believed. In fact some content creators may be having nightmares about it already,as it is technically possible to import textures from SL, scripts, and prims (via measurement and reproducing) In fact the competition is hard on SL’s heals, and the capital cash barrier to entry is vastly mitigated by open source software.

Someone who understands the shareholder value movement.

Going public isn't just about raising money in exchange for some disclosure obligations, it's about losing control to people who think of your business only in terms of numbers. Most of them are short-sighted and have no loyalty and no interest in the product.

Just not true. Enough said