Angie's Wish

Several observant readers have brought up interesting questions about a proposed IPO for Indianapolis-based Angie's List, an online website that aggregates customers reviews of service companies and sells memberships to consumers to access that information. The pertinent facts here are as follows:

Angie’s List said in its filing with the Securities and Exchange Commission that its revenue was $59 million in 2010 and $38.6 million for the first six months of 2011. Its net losses for the same periods were $27.2 million and $25.8 million, respectively. It also said it had accumulated debt of $143 million as of June 30 . . .

In listing its risk factors, the company noted that it has lost money since its inception and expects this will continue for the foreseeable future. It also noted that it has significantly increased spending on acquiring new members.

Angie's List, co-founded by Angie Hicks and Bill Oesterle, has been in existence for 16 years and it's lost money every year. It has $143 million in accumulated debt. It lost $50 million in the last two years alone. Excuse me for asking, but who in their right mind would invest money in a company with that kind of a losing track record? Who benefits from a public offering other than the creditors to whom a mountain of debt is owed by a company that has never turned a profit?

Last week, Gov. Mitch Daniels and Mayor Greg Ballard announced more than $14 million in state and local economic development incentives being awarded to the company in exchange for a promise to add up to 500 new jobs by 2015. One of the company's co-founders, Bill Oesterle, served as Gov. Daniels' campaign manager. You have to wonder if the timing of that announcement wasn't planned to coincide with the company's planned announcement this week of its IPO.

I'm not an investment guru, but what am I missing here? An attorney professing to be an expert in such matters at Barnes & Thornburg tells the IBJ that there's nothing unusual about investments in companies with a long record of losing money being offered to the public.

"Still, it’s not unusual for a company to file for an IPO with a money-losing track record, said David Millard, chairman of Barnes & Thornburg LLP’s corporate department and an expert on IPOs." 

 “This is a company that’s been around for a long time and has a great history,” he said. “But it’s got that challenge of the market: How skittish are investors?”

Not sure if there is a relationship between the two, but the company's CFO has the same last name as David Millard. His name is Robert Millard.

I've always admired Angie's List and its contributions as a growing Indianapolis business, but I had no idea the company has been bleeding money every single year of its existence. I had assumed it was a huge success story and that's why it was going public. I'm absolutely astonished that a company could continue to expand and survive this many years without ever turning a profit. The IBJ earlier reported that the company has received large infusions of cash totalling more than $50 million from reputable investors in recent years, including T. Rowe Price, Battery Ventures, Saints Capital and Wasatch Funds. The company hired Bank of America to handle its IPO, which got its own bailout of sorts from billionaire Warren Buffett yesterday. At least one business writer, Investor Place's Tom Taulli, says Angie's List won't come highly recommended because of its mounting losses. Hell, what do I know? I'm just a gumshoe lawyer trying to eke out a living.