Remember BATS?That’s the electronic stock exchange that was scheduled to IPO and start trading on its own stock exchange yesterday. But then the stock flash-crashed to near-$0 on itself in what will probably go down as the most embarrassing and horrifying IPO failure of all-time
Surely, someone is letting the folks at BATS know that it’s not the end of the world (unless companies decide they no longer want to trade on the BATS).
You see, financial history is riddled with IPOs that didn’t work out. See the list below.
One such failed IPO was that of Goldman Sachs back in September 1998. Hank Paulson and Jon Corzine probably haven’t forgotten those days.
Here’s a recap by Bethany McLean and Andrew Serwer from Fortune‘s archives:
But of course Goldman’s (GS) IPO, okayed by the partners in June, was scuttled, officially “withdrawn,” in late September. Instead of a hallmark of the roaring ’90s, which some had predicted it would be, the IPO became a high-profile victim of the financial firestorm that has swept across the globe. Goldman put off the deal because once the stock market crashed (shares of the big Wall Street houses crashed even harder), the numbers didn’t work anymore. The deal would have valued Goldman at $28 billion (a number cited in a letter to the firm from Goldman limited partner and former co-CEO John C. Whitehead, which Fortune obtained) if, as once envisioned, Goldman sold stock at around four times book value. Post-September, Goldman stock might have brought a slight premium to book, valuing the firm at a mingy $7 billion, which would have left it far short of the swag the IPO was supposed to spread throughout the firm to its partners, limited partners (mostly retired partners with capital still in the firm), and other employees.
According to the firm’s co-CEOs, Jon Corzine (rhymes with “sign”) and Henry “Hank” Paulson, putting the IPO off “was a pragmatic decision.” Says the bearded Corzine, with his trademark Cheshire Cat grin: “At the appropriate time we will revisit the matter. Now we have to move forward.” But contrary to the blase nature of that statement, it is clear, based on interviews with Goldman partners, employees, customers, and Wall Street sources, that debating — and then icing — the IPO was a wrenching experience that has bruised the firm. It has spotlighted, and in some cases revealed, weaknesses both in Goldman’s capital structure and in its mix of businesses. It created tensions between the firm’s general and limited partners. And it heightened rumours already circulating on Wall Street about the rivalry between Goldman’s investment bankers and traders in general, and Corzine and Paulson in particular.
Those were the good ol’ days, pre-MF Global and pre-financial crisis when people couldn’t pronounce Corzine’s name and didn’t know Paulson’s nickname.
Anyway, fast forward fourteen years and now you have the most powerful investment bank in the world.
So, worry not, BATS. All hope isn’t lost.
Here are other major firms who were forced to withdraw their IPOs due to “technical issues”…or just plain hopeless business models.
- Kozmo.com, 2000 (“market conditions”)
- CarsDirect.com, 2000 (“investor scepticism about electronic-commerce stocks”)
- AltaVista, 2001 (“market conditions”)
- Nextel International, 2001 (“market conditions”; losses by parent company)
- Prada, 2002 (“market conditions”)
- Old Country Buffet, 2004 (“market conditions”)
- Go Daddy, 2006 (“market conditions, the war in the Middle East, skyrocketing oil prices, and the poor performance of technology stock on Wall Street”)
- Bear Stearns’ Everquest Financial Ltd., 2007 (CDO meltdowns)
- Classmates.com, 2007 (“market conditions”)
- Al Gore’s Current TV, 2009 (“market conditions”)
- Solyndra, 2010 (“ongoing uncertainties in the public capital markets”)
Any we missed?