Competitors, too, panned the prospectus for incriminating nuggets. One of them, delighted to find that one product line represented 70% of the company's revenues, derided Cirrus as a one-product company that wasn't serious about some of its customers. "It created an issue our salespeople had to deal with," says Hackworth with a sigh.
When competitors and customers run out of ammunition, Wall Street analysts are always ready to rearm them. "They are out there digging, and that's something you have to deal with on an ongoing basis," Hackworth says. "We've probably had nearly a dozen reports on the company, and I've absolutely had moments of shock reading them."
The experience has been instructive -- to say the least. "I understand what going public really means," says the 49-year-old. "It doesn't just mean that securities will be held by public shareholders instead of private ones. It means going public with a great deal of information. It's easy to underestimate the amount or detail that will come out."
I'll Become the Target of a Hostile Takeover
On paper, International Broadcasting Corp. (#44) may sound like the ultimate in harmless -- even old-fashioned -- enterprises.
But on Wall Street, even a company that counts the Harlem Globetrotters, the Ice Capades, and several amusement parks among its holdings can become just another undervalued stock. That makes it subject to some hard realities. "Any public company knows that what happened to us is always a possibility, and you have to be prepared," says Thomas K. Scallen, president and CEO. "But when you're trying to build a business, you can't help but resent it."
About a year ago Scallen noticed that IBC's stock was trading heavily. "You watch it, and you think, OK, now what's going on?" recalls Scallen. Soon he was informed that J&T Investors, an Atlanta group, was attempting a takeover of IBC. "The whole thing was just a wonderment," says Scallen, 62.
Huddling with directors and lawyers, Scallen reviewed the offer and decided it was not in the company's interest. Last June, J&T's two principals attended the company's annual meeting. Introducing them from the podium, Scallen asked them to stand. As they did, a process server handed them legal papers. "Why did we do it like that? We're in the entertainment business," notes Scallen, whose suit claims that J&T was misleading in its attempts to buy the company and manipulated the stock price. "We don't think they acted properly." J&T has filed a countersuit against the company, Scallen, and some of his board members.
The stock hasn't been the only thing gyrating wildly. As the takeover proceeded, employees began bouncing off the walls. "The jungle drums are beating, and everyone's worried," Scallen says. " 'What's going to happen to this company?' they want to know. 'What's going to happen to my job?' It's hard on them. What hurts the company is the fear they go through." Worse, they sometimes act on it: one prospective hire said he would come aboard only with a two-year contract.
To calm them, Scallen has made sure everybody has been kept up-to-date. "We kept everybody informed about what was going on and what the board's view was," he says. "Still, it scares the heck out of them. You spend a lot of time and pay lawyers a lot of fees." Because Scallen has taken a company public before, IBC is not as vulnerable as it might have been. The company, for instance, has a supermajority clause in its articles of incorporation; 80% of the shareholders must approve any sale or merger. "As a public company, you have to plan for this," he says. "There are several steps you can take."
But alas, nothing is foolproof. In early March, even as Scallen was awaiting a trial date to be named, he noticed IBC stock was "trading like crazy, so it looks like somebody has the same idea as before." As of midmonth, he reported, "I'm in the waiting stages again. All I can do is wait." Then he sighed, quickly adding, "In a way, it vindicates our judgment about the opportunities we see. I guess it's just part of being public."
LIVING YOUR STOCK PRICE
"The first time we were listed on NASDAQ was very exciting. I went to a brokerage near my house and plugged in my stock symbol. There it was. I had purposely parked a long way away, and walking back to the car, I just had this big smile on my face. I had been a finance major in college, and I remembered sitting in one of my classes, with long hair, thinking, 'What I want to do someday is have my own public company.' Now, I could sit and calculate how each sixteenth-of-a-point move added another $200,000 to my net worth.
"That lasted about a day. Then everything else took hold. Last August we started working to do a bigger offering. By October three underwriters were ready to do a secondary, and my wife and son and I decided, 'Let's take a half day on Friday and go to Aspen and relax a little bit.' We were listening to the news when the market started plunging. I called my underwriter. 'It's brutal,' he said. On Monday our stock went down half a point. I got the calculator out and figured my net worth had just dropped almost $1.5 million in a day. I was pretty down.
