Goldman Reams Clients With Limelight (LLNW); Feels Pain But Sits Pretty


Limelight Networks (LLNW) has been a disaster–for everyone except lead underwriter and major private investor Goldman Sachs.  Limelight just bombed its first quarter as a public company, after going public less than three months ago.  It also provided disappointing guidance for the rest of the year.

When Limelight went public back in May, the second quarter–the one it just whiffed–was half completed.  What’s more, CDNs are a long-term contract business, which means Limelight should have had an excellent view of not only the quarter but the rest of the year.  Now, however, two months after unloading stock at $15 a share, the company prints a negative “surprise,” and sends the stock skidding to $9.

Part of an underwriter’s job is to make certain that IPO companies build enough cushion into their numbers that they won’t miss the first few quarters out of the box.  Limelight missed the first quarter, despite its having been half done.  This means that Goldman did a terrible job managing the IPO–screwing investor clients who bought the stock at $15 and allowing its corporate client, Limelight, to look like a hack-job.  It also suggests that Limelight’s CFO, Matthew Hale, is incompetent.

True, as a 45% Limelight shareholder, Goldman is feeling some pain: the value of its 30 million shares dropped about $200 million this morning.  But don’t cry for Goldman.  It bought those shares a year ago for $3.26 apiece, which means that, even at today’s price, it has still nearly tripled its money.  And the firm presumably pocketed an additional $5-$10 million in fees for taking Limelight public. 

So if you’re sore about getting stuck with Limelight at $15, don’t forget to direct some of your ire toward 85 Broad.

Disclosure: SAI’s chairman Kevin Ryan is an investor in and CEO of Panther Express, a Limelight competitor.  After the jump: A bonus quote from Goldman VP Pete Perrone, raving about Limelight…

Advertisement in IR section of Limelight site

“Limelight Networks is a clear leader in Internet-based digital media distribution, with an outstanding track record of performance, customer service, innovation, and the financial results that follow. With a network designed from the start for bandwidth-intensive rich media applications, Limelight is uniquely positioned to help customers deliver new broadband media services. We look forward to helping drive this next phase of growth.”

Pete Perrone, Vice President, Goldman Sachs.