Easier said than done, Kopstein discovered. Lacking underwriters, Optical Cable also lacked market makers. For a company's stock to qualify for a National Market listing on Nasdaq, not only must that stock meet certain performance minimums (see " So You Want to Go Public" ), but the company also must have two third-party dealers to handle outside orders to buy and sell its shares. For most of the IPO universe, a company's underwriters ipso facto become its market makers as well as its research analysts in the financial community.
It so happened that at this time David Adam, a former Wall Streeter turned financial freelancer, spotted a tombstone ad and phoned in to ask if there was anything he could help out with. Kopstein didn't hesitate. "Sure," he said, "find me a couple of market makers." Adam called around to his buddies, but "they wouldn't touch Kopstein. They saw him as a guy trying to out-finesse Wall Street. Those fellows get nice fees and warrants and stock options and 'green shoes,' but Bob would have none of it. Everybody said, in effect, 'We don't go down there and tell him how to make cable.' " It took more than 40 calls for Adam to unearth two firms willing to handle Optical Cable's stock.
Underwriters rely on mutual funds and other institutional investors to commit to the lion's share of an issue and establish its final price. But as a peddler of unknown merit selling a comparatively scant number of shares in a business unfamiliar to institutional investors, Kopstein reached just one such buyer, Newby & Co., a Rockville, Md., investment firm, which subscribed to 150,000 shares for some retirement-fund clients. Kopstein blames the absence of other institutional interest on people's unfamiliarity with his unusual line of business.
"What made it difficult for us where it wouldn't have been for others is that there was no other company doing the same type of thing. When all you have to do is pull up a set of comparable figures and see where you fit in, selling yourself is easier. But if institutions don't have a peg by which to judge whether you're better or worse than other companies, they sit back to see how the market receives the offering," he says.
Kopstein tagged Optical Cable shares at $10 to yield a modest (for a fast-growth technology issue) price-to-earnings ratio of 17. "I wanted to get a reasonable amount of shares out there and see how the market accepted the price," he says. "When we needed more money in the future, we could go back out at whatever price the market thought the stock ought to be valued."
The market was even more positive about the stock than Kopstein was. The offering price more than doubled within five weeks, passing $22 on May 9. A week after that, it was $35; in six days more, $79. "Maybe buyers from California," the befuddled Kopstein conjectured, "were sending in orders for stock they weren't allowed to buy on the offering."
As the share price inexplicably jumped some 30% a day, Kopstein got a call--not from the SEC but from CNBC. The financial-news cable network invited him on the air. On May 23, just after 8:30 a.m., greenhorn Kopstein got skewered by the squawk box. "The interviewers kept shooting arrows. They wanted to know more about what the stock was doing than what the company was doing." Kopstein guilelessly confessed ignorance to the machinations of the stock market and seized the moment to educate millions of viewers about Optical Cable--the job at which he insists the underwriters he'd hired had failed. The billionaire for a day was astounded by the response. "Right after I got off the air, the stock went through the roof. People called and E-mailed, saying that the company of a CEO who could stand up like that while they tried to fill him full of holes--that company was going to have a fantastic future."
Despite the exhilarating ride, Kopstein admits he wouldn't take the solo route again. Toting up the start-at-5-a.m. days he devoted to the IPO in addition to running the company, he says that leaving out the middlemen "cost at least as much as if I'd used an underwriter to do the deal." Nonetheless, acknowledges A. G. Edwards's Burke, "what he did is incredible. For most CEOs of most companies, it would be too much of a challenge." But not impossible. "If you have a good company and good advisers--and a lot of gumption--there's bound to be somebody who wants to own your stock."
Robert A. Mamis is a senior writer at Inc.
Resources
OPTICAL CABLE, Robert Kopstein, P.O. Box 11967, Roanoke, VA 24022; 540-265-0690; kopstein@occfiber.com; www.occfiber.com 68
Special Report: The Hottest Small-Company IPOs
- The Secret World of IPOs - The new small companies in the public arena: the top aftermarket performers, the lawyers and underwriters they used, the hot industries. A guide to the action of the last year. By Robert A. Mamis.
- You Don't Know Me... - How Robert Kopstein took his company public--on his own. By Robert A. Mamis.
- So You Want to Go Public - What each of the exchanges demands from companies wanting to get on them. By Stephen D. Solomon.
- Follow the Money - A dollar-by-dollar look at the cost of one company's IPO: why $7.2 million raised is $6 million earned. By Stephen D. Solomon.
- Light Up. Go Public. Quit Your Day Job - The story behind Caribbean Cigar Co.'s public offering: "the cigar craze was getting huge," says the founder, and he needed money to keep up. By Jay Finegan.
- FYI: Navigating the IPO Market - Background on the writers of the IPO package. By George Gendron.
