Numb and Number: Public Offering, Private Turmoil
BY Leslie Brokaw
Ready to go public and rake it in? Read this before you leap.
On April 9, 1997, at 10 a.m., Al Agbay finally made it: he became head of a publicly traded company. "I really thought there would be high fives and champagne and a lot of congratulating back and forth," says the chairman and CEO of Nexar Technologies Inc., a $19-million maker of easy-to-upgrade desktop computers. "But I was just numb. It was business as usual, which in retrospect was disappointing because going public was truly a grueling process."
Which part, exactly, was most grueling? It's hard to say. For Agbay, "nearly everything that could have gone wrong did go wrong"--much of it beyond anyone's control. The result: a hesitant Nasdaq debut and a beleaguered CEO with some straightforward advice for those who view a public offering as their ultimate reward. Leslie Brokaw, senior editor of Inc. Online, asked Agbay whom he blames for the fact that Nexar's road show ended just in time for the stock market to "correct" itself by 700 points.
AL AGBAY: It wasn't our underwriters' fault, and I don't think it was Nexar's fault--I think God just said, "Hey, let's hold back." We were having great meetings with potential investors, and it seemed as if they really understood us--we knew a lot of due diligence was going on, because the institutions were calling our accounts and suppliers to verify information--and then it's time to go public, and everything is crashing around us.
INC.: In the last days of your road show, there was also a freak April snowstorm.
AGBAY: We left the Boston meeting, went to the airport, and sat on the plane for an hour before all the flights were canceled. We wound up renting a four-wheel-drive vehicle to drive to New York for the final presentations. It took us nine hours to get there--it was a nightmare.
INC.: Your prospectus said that the stock would be priced between $11 and $13. Instead it came out at $9--and almost a week later than scheduled. What happened?
AGBAY: I had gotten some books about the process, and they said that the ugly part comes after the road show, when you sit with the investment banker and negotiate the price of the stock. And it was a painful process. We're negotiating the price, and I'm convinced I have the best product in the industry, so I think my stock is worth more than the range on the prospectus, and our lead underwriter, Sands Brothers & Co., wants to convince us that it's worth far less because the market is collapsing. Plus, the lower the value, the greater the movement, and the underwriters make money every time the stock changes hands. So those discussions are very ugly. You always say, "Let's not take anything personally," but you can't help it. We had several days of intense discussions.
INC.: Once that was done, did you feel any better?
AGBAY: I was a little bit numb. There was a 48-hour period during the angst and contemplation over the new pricing when I decided to put off the offering for three or four months. I was fluctuating between "OK, it's not going to happen, so where are we going to get the working capital?" and thinking, "Yeah, $9 in this marketplace--we should take it."
INC.: What nudged you to go ahead with it?
AGBAY: We accepted the lower value because--and this isn't corny, it's truthful--we were giving much better value to the investors. And in the big picture it was more important to have $20 million than nothing. We made the only decision we could have made.
INC.: What advice would you give small companies that are trying to make a decision about going public?
AGBAY: Stay private.
NEXAR TECHNOLOGIES, Al Agbay, 182 Turnpike Rd., Westborough, MA 01581; 508-836-8700 22