Scottsdale's Fender Guitars is Taking Company Public

[JRNYMAN]

This story was kinda surprising to me - I guess I just always assumed they were a publicly traded company. This is great news for those who dabble in the Market to some extent - especially those whose stock portfolios focus primarily on the musical instrument companies.

The third and fourth sentences are almost contradictory of each other. Makes you wonder how they could post the annual sales figures they do yet still be that much in debt.

http://www.azcentral.com/business/artic ... m-ipo.html

Maker of Fender guitars files for $200M IPO

NEW YORK - The company that makes Fender guitars says it is going public with a $200 million IPO.

The iconic guitar maker was founded in 1946 by Leo Fender, and Fender guitars were played by some of the world's biggest music stars, from The Beatles to Jimi Hendrix to Eric Clapton.

Fender Musical Instruments Corp. says it's the country's biggest seller of electric, acoustic and bass guitars. It also makes amplifiers and other instruments including banjos, ukuleles and mandolins.

The Scottsdale, Ariz., company says about $100 million of the initial public offering's proceeds will go to pay debt.

It intends to list the "FNDR" symbol on the Nasdaq.

[steveo777]

They're broke.......run!!!!

Buy as much stock as you can, hype it, then short it.

[strangegrey]

Not sure how I read this.

The one problem with taking a company public is the quarterly statement....and that may be a driver of price increments coupled with cost cutting maneuvers.


Was going to consider purchasing a wolfgang and 5150-3 in the fall. I might have to rethink that....

[JRNYMAN]

Not sure how I read this.

The one problem with taking a company public is the quarterly statement....and that may be a driver of price increments coupled with cost cutting maneuvers.

Perhaps.

Was going to consider purchasing a wolfgang and 5150-3 in the fall. I might have to rethink that....

The company's future and future strength doesn't play into this at all. If the S.E.C. had even the slightest doubt about the future of the company and their ability to satisfy shareholders, Fender wouldn't have gotten past the application stage of the process.

Just like Facebook's immediate intention upon going public was to purchase the necessary resources to stay aligned with emerging technologies, Fender made those purchases on credit. The $100M they spend to payoff creditors will ultimately save them huge dollars in interest charges over the term of the loans.

A couple of years ago, they expanded their production facility here to twice its original size in an effort to accommodate the demands of the consumer. They're doing just fine.

[strangegrey]

The company's future and future strength doesn't play into this at all. If the S.E.C. had even the slightest doubt about the future of the company and their ability to satisfy shareholders, Fender wouldn't have gotten past the application stage of the process.

Whether Fender has a going concern issue or not, is not my issue here...

Closely held music companies tend to put forth a better product, period...and there are numerous examples of that. Music Man, for one.

I'll name you two of the largest examples of the opposite:
* CBS's purchase of this same company, Fender, in the late 60s. This is regarded as the worst era of Fender, from a quality perspective. Stupid design issues (3-bolt micro-tilt anyone?) and poor overall quality plagued Fender until CBS sold the company to employees in 1985.
* When Gibson was purchased by the Norlin corporation, it almost killed the company....Literally, Gibson was teetering on the brink when Henry Juszkiewicz and David H. Berryman.

The above two examples almost killed both companies...dead.

Musical instruments require a certain attention to detail. They require a certain level of service. They require, in some cases, a certain eye towards tradition. These things all tend to fall by the wayside in a large public company.

How long will it take before a public Fender starts having these quality issues? sometime between the day it goes public and never....but its enough for me to reconsider my gear choices a bit...

[KenTheDude]

The company's future and future strength doesn't play into this at all. If the S.E.C. had even the slightest doubt about the future of the company and their ability to satisfy shareholders, Fender wouldn't have gotten past the application stage of the process.

Whether Fender has a going concern issue or not, is not my issue here...

Closely held music companies tend to put forth a better product, period...and there are numerous examples of that. Music Man, for one.

I'll name you two of the largest examples of the opposite:
* CBS's purchase of this same company, Fender, in the late 60s. This is regarded as the worst era of Fender, from a quality perspective. Stupid design issues (3-bolt micro-tilt anyone?) and poor overall quality plagued Fender until CBS sold the company to employees in 1985.
* When Gibson was purchased by the Norlin corporation, it almost killed the company....Literally, Gibson was teetering on the brink when Henry Juszkiewicz and David H. Berryman.

The above two examples almost killed both companies...dead.

Musical instruments require a certain attention to detail. They require a certain level of service. They require, in some cases, a certain eye towards tradition. These things all tend to fall by the wayside in a large public company.

How long will it take before a public Fender starts having these quality issues? sometime between the day it goes public and never....but its enough for me to reconsider my gear choices a bit...

They aren't being bought by a corporation, they're just instituting an IPO to raise cash. Your examples are different than this.

[strangegrey]

They aren't being bought by a corporation, they're just instituting an IPO to raise cash. Your examples are different than this.

Exactly how?

My point deals with closely held companies vs publically held corporations....my examples are SPOT on.

[KenTheDude]

They aren't being bought by a corporation, they're just instituting an IPO to raise cash. Your examples are different than this.

Exactly how?

My point deals with closely held companies vs publically held corporations....my examples are SPOT on.

Both of your examples deal with corporations buying a company which usually means bringing in a new regime (or at least some personnel change). This company (as far as I know) is not going through a regime change. They are just raising cash to pay off debt.

[JRNYMAN]

They aren't being bought by a corporation, they're just instituting an IPO to raise cash. Your examples are different than this.

Exactly how?

My point deals with closely held companies vs publically held corporations....my examples are SPOT on.

Both of your examples deal with corporations buying a company which usually means bringing in a new regime (or at least some personnel change). This company (as far as I know) is not going through a regime change. They are just raising cash to pay off debt.

Nope, no regime changes nor any reductions in staff - In fact, they are currently hiring! Being the iconic, major entity they are in the world of music, local media follows and reports their every move. Arizona doesn't have a whole lot of things to brag about (and the seemingly constant bad publicity the state generates doesn't help...) Fender Guitars is up there with The Grand Canyon and ASU in terms of things we're most proud of.

Here's another article about this topic which sheds quite a bit more light on the subject and also presents it in a very positive way.

The Fender IPO Could Add Cool to Your Portfolio

http://www.businessweek.com/articles/20 ... -portfolio

By Claire Suddath on March 13, 2012

You might not be able to play guitar like Eric Clapton, but you can soon add some rock ‘n’ roll cool to your portfolio. On Friday, guitar maker Fender Musical Instrument filed for an initial public offering, seeking to raise $200 million, about half of which will be used to pay down the company’s $246 million debt. The stock will be listed under the symbol FNDR on Nasdaq.

Analysts would ordinarily be skeptical of a company that’s going public to help balance its books. Investors prefer companies with clear plans to expand; they don’t usually want to help pay for acquisitions and debts already undertaken. But Fender has something going for it that very few others possess: It’s an iconic brand people truly love. The company has been around since 1946 and has a solid reputation for making first-rate guitars such as its Telecaster and Stratocaster models. Eric Clapton, Jimi Hendrix, Pete Townsend, and John Mayer either are—or have been—loyal customers.

“It’s up there with Harley (HOG),” says Tom Taulli at InvestorPlace’s IPO Playbook, “as a company that people love so much they’re willing to tattoo the logo on themselves.” That tattoo cachet, as it were, could lure additional investors when the stock starts trading in a few months. Fender has long dominated the industry—with $700 million in revenue last year, it was the No. 1 seller of acoustic, electric, and bass guitars in the U.S.—and it’s expected to remain on top. Its closest rival, Nashville-based Gibson Guitars, had $500 million in sales. Gibson, a privately held company, has no reported plans to go public.

Like nearly everything else, musical product sales took a hit during the recession, dipping from $7.5 billion in 2007 to $5.9 billion in 2009, according to the National Association of Music Merchants (NAMM). Currently, sales are back up in the $6.4 billion range, with guitars the dominant instrument. (Guitar sales in 2010, the most recent year for which NAMM has data, stood at $839 million). That explains some of Fender’s debt; after a $17.3 million loss in 2010, the company climbed back into the green with a $3.2 million profit last year.

In recent years, Fender has branched out from instruments to accessories. It acquired Kaman Music in 2007 and has worked with Apple (AAPL), Hard Rock Café, and MTV Games (VIA) on co-branded products such as the Squier Stratocaster designed for the video game Rock Band 3.

The company’s biggest retail outlet is Guitar Center, the world’s largest musical instruments seller. Weston Presidio, the private equity firm that owns 43% of Fender, also has a stake in Guitar Center. “Even if Fender doesn’t come back to the way they were” before the recession, says Taulli, “there’s still a lot of room for growth. And now they’ll be able to use stock as currency for acquisitions over the years as they expand into other markets.”