Some of the deal's participants speculate that at some point along the way Goldman chose to let the deal die a quiet death. "I think Goldman basically said, 'There are two ways we can take our medicine here,' " one participant asserts. "The first is to say, 'We aren't going to take you public.' " The second, this participant speculates, would be for Goldman to "go out and make a token effort, and if it doesn't work out, say, 'Hey, tough market.' " The decision not to put the organization on the line, this deal participant adds, wouldn't likely be a formal one: "It's a real subtle, easy thing. You just kind of see if the deal sells itself."
An underwriter that's committed to completing an IPO at all costs, by contrast, has several avenues of recourse if the deal starts to falter. And some say that if an underwriter--especially one with Goldman's unmatched distribution clout-- really wants to push a stock, it can twist the arms of key investors to buy a piece of the offering, reminding them of the many millions they've made as members of its cozy IPO circle. "You just call in chips," explains one banker with knowledge of this deal. "That's Investment Banking 101."
Goldman strongly refutes any suggestion that it didn't push the Wired deal. "We worked extraordinarily hard to persuade people and take them through their objections," says Goldman's Fitt. "At the end of the day, investors make up their own minds." Noting that Goldman got the Wired team in front of more than 50 money managers during the road show, she adds, "After a meltdown in the Internet stock market, that doesn't happen without a lot of calls and cajoling." As for the original sky-high valuation, Fitt says it was "entirely reasonable" given the market conditions in the spring. "Had the market not been so volatile," she maintains, "I believe the offering would have been quite successful."
Asked for comment, Wired CFO Jeff Simon officially skirts the issue of Goldman's performance, responding tersely via E-mail: "We respect Goldman's professional reputation." But according to a former Wired executive, shortly after the deal's demise, Rossetto bitterly complained to several employees assembled in his office that Goldman hadn't put its full weight behind the deal. Among many Wired staffers, too, it's clear where fingers are pointed. "Louis and Jane," asserts one former Wired executive, "were talking like they'd been stiffed by Goldman Sachs."
Ultimately, though, such feelings of betrayal bespeak a certain navetÉ. It's a navetÉ that's forgivable for entrepreneurs who were far from players in the world of high finance--unless you count the fact that, as one magazine insider notes, they "had all read Liar's Poker." More to the point, it's a navetÉ that's by no means uncommon among companies entering the IPO process.
Wired's underwriters may have been sitting at the next table over from the distraught Wired staffer in that San Francisco restaurant, apparently unfazed by the deal's painful crack-up. But what Wired and scores of companies like it seem to misunderstand is this: the company and its advisers are never sitting at the same table to begin with. Their interests are never completely aligned. And once all is said and done--once the market euphoria has abated, once the road-show crowds have dispersed--the bankers get up and go home. It's the company that's left to clean up the mess.
Jerry Useem is an associate editor at Inc.
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