Thursday, November 17, 2011

Angie's List IPO Proves Old Saying That A Sucker Is Born Every Minute

It's a company that has never made money in its 16 years of existence, is swimming in debt and has no business model upon which to base any future potential for turning a profit unless you consider Ponzi schemes selling subscriptions for business information you can obtain for free on the Internet to be a legitimate business model. Yet, Indianapolis-based Angie's List suckered investors into dumping $114 million into the purchase of 8.8 million shares in the company at its initial public offering today. From Bloomberg News:

Angie’s List Inc., the Indianapolis-based consumer-review service with more than 1 million paying members, raised about $114 million in its initial public offering Wednesday after pricing the shares at the top end of the proposed range.

The company sold 8.8 million shares for $13 apiece, according to data compiled by Bloomberg, after offering them for $11 to $13. Angie’s List will trade on the NASDAQ Stock Market under the symbol ANGI.

Angie’s List, which provides reviews of plumbers, electricians and other service providers, may benefit from the success of Internet peer Groupon Inc.’s IPO this month. The Chicago-based online-coupon leader raised $700 million Nov. 3, 30 percent more than it sought, after pricing the shares above the marketed range. The stock surged 31 percent in its trading debut and is up 20 percent since the IPO.

At the midpoint price of $12, Angie’s List would be valued at $667 million. Revenue at Angie’s List increased 46 percent, to $62.6 million, in the nine months ended Sept. 30, compared with the year-earlier period, the filing shows. Its net loss widened to $43.2 million from about $19 million.
What you should know is that the current investors in Angie's List, including its founder, dumped a significant amount of shares in the IPO as foolish investors gobbled the stock up:

The company planned to sell about 6.3 million shares in the offering, with the remaining 2.5 million sold by existing shareholders, according to the prospectus. Battery Ventures had planned to reduce its stake to 15 percent from 18 percent, while BV Capital was paring its stake to 9.3 percent from 12 percent. Company co-founder Angie Hicks planned to trim her stake to 1.5 percent from 1.8 percent, the filing shows.

A commenter at the IBJ's website pretty much sums it up:

Everyone connected with the company is selling.
Never turned a profit.
Doesn't even project to be profitable in the future.
Who the heck is buying shares in this company?
Hopefully, the manager of your funds isn't investing in this sure loser. If your stock funds manager was stupid enough to invest in this company, you should be looking for a new manager.


Had Enough Indy? said...

Groupon's IPO is just as mysterious. I don't get why folks are buying a lot of these internet companies that don't make a profit and really have no inherent reason why they would become profitable.

Gary R. Welsh said...

I'm not sure of Groupon's long-term viability, but it has had much better financial results than Angie's List after a very short life of existence.

Gary R. Welsh said...

It looks like the IBJ has been purging comments posted to its online story.

Paul K. Ogden said...

I never understood Angie's List's business model. I just didn't see how that business could turn a profit. Apparently it hasn't been.

Review Bible said...

Thanks for the post. You should take part in a contest for one of the best blogs on the web. I will recommend this site!