Cruising to an IPO -- with Mixed Results

Steady, extremely rapid growth for five years. That's the typical profile of an Inc. 500 Hall of Famer. It's also music to Wall Street's ears.

It's no surprise that several CEOs of Hall of Fame companies found a receptive audience when they proposed taking their businesses public. In fact, at least six Hall of Famers have scored an initial public offering, all in the 1990s.

Of course, going public and progressing smoothly through the many minefields that publicly owned companies must maneuver are two different things. And so it stands to reason that not all the companies have fared equally well.

The following updates summarize what has happened to six Inc. 500 Hall of Fame companies since they embarked on an IPO.

Bertucci's Inc.: In 1998, believing that investors were undervaluing restaurant stocks in general and his stock in particular, Joey Crugnale bid $8.50 a share, or about $2.50 above the market price, for the 75% of Bertucci's that he didn't already own. That wasn't enough. NE Restaurant Co., based in Maynard, Mass., countered with an offer of $10.50 and snatched the pizza chain, headquartered in Wakefield, away from Crugnale. "Initially, I was upset. It was a company I started,' says Crugnale, who now operates a chain of seafood restaurants in the Boston area.

ECCS Inc.: A longtime producer of data-storage hardware, this company in Tinton, N.J., has recently diversified into software. CEO Gregg Azcuy, who joined ECCS (East Coast Computer Systems) not long after its IPO in June 1993, says it's been a challenge to explain the change to investors. And though the company's stock price hasn't made significant gains -- it's hovering near its $6-per-share IPO price -- Azcuy says that having access to public capital allows for greater growth and freedom to make acquisitions.

IMRS: Jim Perakis has no regrets about his early days as CEO of a public company. The pre-IPO road show in 1991 allowed him to showcase his analytic software business, IMRS. (The company was later rechristened Hyperion Solutions Inc. and is now based in Sunnyvale, Calif.) At first Perakis enjoyed plugging his company's success, including its Hall of Fame kudos. But the fun wore off. He tired of, among other things, the nail-biting pressures of trying to hit Wall Street's financial estimates for Hyperion each quarter. In April 1996 a downward blip in earnings caused the stock price to plunge by more than 50% within one week. Perakis stepped down as Hyperion's CEO two years ago and now works with small, early-stage companies in which he invests.

Lai, Venuti & Lai Communications: This high-tech marketing and advertising company originally based in Santa Clara, Calif., didn't go public of its own free will. When a big customer failed to pay its bills in 1997, a resulting cash-flow crunch forced Lai, Venuti to file for Chapter 11. At its creditors' insistence, the company had to become publicly owned as a condition of emerging from bankruptcy.

The deal also required a merger with Digital Power Holding Co., an inactive public company. The business was consolidated as I-Storm under president and CEO Calbert Lai and based in Mountain View. In a 1999 annual report, I-Storm, which specializes in E-commerce business development, conceded that it may not survive.

Metro Information Services Inc.: Having previously financed its growth entirely with its own revenues, this software-development and consulting company switched gears after its IPO, in January 1997. It acquired eight companies in three years, enabling it to grow rapidly and enter markets as far away as California, says chief financial officer Robert Eveleigh, whose company is based in Virginia Beach, Va. Metro's shares have slumped to about half the IPO price of $16. "You have to be concerned," says founder and CEO John Fain, "but you can't overdo it."

Starpak Inc.: Ask Emmet Stephenson about his IPO experience, in 1997, and he's likely to groan. He recalls, for example, preparing reams of documents about his Denver-based software-services company, which was renamed StarTek Inc., also in 1997. And then there were the hours he spent traveling from city to city pitching the company to investors. "All in all, it's a pretty inefficient process and not much fun,' Stephenson says. But in his case it may have been worth it: Stephenson and his family hold StarTek shares valued at more than $400 million, according to the company's reports.

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