You Don't Know Me...

The story of one owner who, shunned by Wall Street, took his company public by himself.

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The IPO of the Year

Shunned by the Street, Robert Kopstein did the unthinkable: he took his company public himself

In contrast to Netscape Communications' much-ballyhooed initial public offering in 1995, Optical Cable Corp.'s 1996 IPO went virtually unnoticed by Wall Street. Optical Cable's IPO resulted in a similar outcome: a founding stockholder became a paper billionaire. But in this case, the 10th digit came and went so fast that its beneficiary, an electrical engineer named Robert Kopstein, had scant time to celebrate. The next day the market took away what it had bestowed only the day before--in spectacular fashion even by 1996's stupefying standards.

Until his company's April 2, 1996, offering (as OCCF on Nasdaq), Kopstein, the chief executive officer of Optical Cable, had been the sole shareholder in the company, a fiber-optic cable manufacturer he'd costarted (with partners, whom he later bought out) in Roanoke, Va., in 1983. After selling 670,000 newly issued shares, he still retained 93% of the company, or $90 million worth. You might think that he'd have been content with that achievement: professionals expect a small company going public to sell more of itself than a mere 7%--generally, they told Kopstein, closer to 25%. But Kopstein's accomplishments didn't stop there. Seven weeks later, to his and everyone else's astonishment, the price of the stock soared to $136 (not adjusted for two splits), a spectacular increment that pushed Optical Cable's market value past $1.4 billion and Kopstein's portion to $1.3 billion. By the close of the next day his net worth had retreated to $800 million, give or take. After two two-for-one stock splits, in May and June, Optical Cable's stock settled back to around $46 (not adjusted for the splits) and closed up 360% for the year. Had all that drama unfolded under the banner of a prominent investment banker, Optical Cable's IPO would doubtlessly have been hailed as the hottest of the year.

None of it did, however. The flotation was pulled off by a total novice--Kopstein himself--and in virtually every review of that record year, the then-46-year-old upstart was airbrushed out of existence. When a stock gains 1,200% in six weeks and splits twice in 21 days, it's usually a matter for investigation. No such cloud hung over Optical Cable, which came to market boasting a history of steady growth and legitimate net sales of $36.4 million. What's more, the company reported net income of $8.2 million--$8.2 million more than Netscape.

If Kopstein had committed any offense, it was snubbing the good old boys: his deal didn't employ the services of the investment-banking crowd. But not for lack of trying. Kopstein's initial initial-public-offering urge had struck in 1992, when his company's net sales were at $19.8 million. He intended to raise only $15 million, enough to expand the factory facilities, hire outside salespeople, pay down some debt, and set aside stock for employee options. So, starting with San Francisco's Montgomery Securities (which, he says, advised him to wait until the company was bigger), he called on prominent investment bankers who specialized in technology. "People told me that if you're in high tech, be sure to get a company that has good research people who can tell the story of what you're really about," says Kopstein.

The half a dozen underwriters with whom he met over the years--including those from such prominent houses as Robinson Humphrey and Dean Witter--couldn't be bothered. One demurred on the grounds that while its researchers were familiar with most things electronic, they knew nothing about optical fiber. Another was simply too busy. A third felt the deal was too trifling to bother with. "For anyone looking to do a small offering," Kopstein says, recalling his disillusionment after the last underwriter, Rodman & Renshaw, in New York City, turned him down, "there was scant interest."

In the fall of 1995 Kopstein at last persuaded an investment banker, Unterberg Harris, of New York City, to handle the proposed underwriting of 1.5 million shares of Optical Cable. The firm printed up preliminary offering prospectuses showing itself as the lead underwriter on the left side of the cover (as protocol dictates), and another investment banker, Piper Jaffray, in Minneapolis, as a coparticipant, on the right. Unterberg Harris prepped Kopstein for personal appearances on the dog-and-pony circuit. But before the road show ended, Kopstein pulled the plug. The price Unterberg Harris was about to settle for was disappointingly below the $10 a share Kopstein thought his company was worth.

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