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SurfGuitar101 Forums » The Shallow End »

Permalink Interesting Fender news (Fender Public Stock Offering - IPO)

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Maker of Fender guitars to rock the market with $200 million offering

The company that makes the guitars that have graced some of the biggest stars of rock and pop -- including The Beatles, Jimi Hendrix and Eric Clapton -- has filed for a public stock offering worth $200 million.

I know I'm in for a few shares! Yes

Bill S.____
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HELLDIVER on Facebook

Last edited: Jul 22, 2012 11:09:04

A fun, fun, fun, investment but what's the chance of making money with it?

Charles

Fender's been around forever...sort of like Disney...I think their stock has decent long-term potential...

ChazSurf wrote:

A fun, fun, fun, investment but what's the chance of making money with it?

Charles

If they get the next big innovation or if there is another guitar boom, then the stock will grow considerably.

JakeDobner wrote:

ChazSurf wrote:

A fun, fun, fun, investment but what's the chance of making money with it?

Charles

If they get the next big innovation or if there is another guitar boom, then the stock will grow considerably.

Their stock will rise HIGH!

image

Ted James
Deep Eddy Records http://www.deepeddy.net
The Nematoads http://www.nematoads.com

if i bought stock in fender it would make me so angry and fearful every time they put out a piece of gear i didn't like, i don't need that kind of stress in my life

http://dinosaurghost.bandcamp.com/
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http://60cyclehumpodcast.tumblr.com/

Should never play in a stock that you have any emotions about at all.. will end up screwing yourself...

I wanna play just like him when i grow up...

The shareholders need to see large gains and that means lowering overhead. They also need new products no matter what. This won't be pretty in the long run. I bet we will see the Fender jeans I predicted.

Last edited: Mar 08, 2012 19:06:41

there are a few companies that seem to keep shareholders happy during the past 20 years (microcoft? apple? starbucks?) while producing quality products that consumers stand in line to buy. If Fender follows a business plan similar to those - inovation, value, quality, authintic - the stock will do well. If you are thinking of buying stock, do it slowly. Don't jump in with a bundle of money at one pop. As said above don't be emotional. However, I think we may see continued growth in music as the rest of the boomers follow the 60-somethings and pusue playing. During the recession Taylor guitars has had record setting sales and profits as they continued to evolve and roll out new guitars every few months. Fender could be a stock to own for the long haul.

Happy Sunsets!

Here's the latest news on this (I've edited the article so only the parts on Fender's IPO remain, got rid of the other stuff):

The Wall Street Journal
IPO OUTLOOK
July 10, 2012

Fender Prepares for an IPO
Guitar Maker, Tech Firms End Dry Spell of Stock Offerings
By SHIRA OVIDE And BEN WORTHEN

What do two fast-growing technology companies, an iconic guitar maker and a skin-infection specialist have in common? All four aim to break the latest dry spell in the IPO market.

Fender Musical Instruments Corp., which has supplied guitars to rock artists from Buddy Holly to Kurt Cobain and John Mayer, network-security firm Palo Alto Networks Inc., travel website Kayak Software Corp. and pharmaceutical firm Durata Therapeutics Inc. said Monday that they plan to push ahead with initial public offerings in coming weeks.

When it comes to revenue and profits, Fender is an octave above the other IPO candidates. The Scottsdale, Ariz.-based company generated revenue of $700.6 million and net income of $19 million for its fiscal year ended Jan. 1.

But based on their growth potential, the two tech companies are set to be valued above the guitar maker. Fender shares are likely to be valued at less than one times the company's most recent annual revenue.

The companies' stock sales will be a test of the IPO market, which seized up in the wake of Facebook Inc.'s disappointing May stock debut and worries about a global economic slowdown.

"There's a meaningful backlog of companies that can go public," said Jayson Noland, a technology analyst with Robert W. Baird & Co., noting that it cuts across industries. "And the longer they stay private the bigger they get and the less they need a really favorable environment."

The pipeline of deals shows the breadth—and contrasts—of businesses aiming to go public. Fender, founded in 1946, sells its instruments through bricks-and-mortar retail stores. Kayak and Palo Alto Networks, meanwhile, are part of a new wave of Web-related companies that have made a comeback on the IPO market over the past 18 months.

Fender shook up rock music with the creation of the Telecaster and Stratocaster guitars. Founder Leo Fender's sale of the company to a division of CBS in 1965 was a sad watershed for many rock purists, but two company insiders bought it back in 1985. Fender now makes most of its money from sales of guitars and guitar amplifiers, but it makes additional instruments and licenses the Fender name.

Meanwhile, Fender hasn't yet started the "roadshow" to pitch its IPO to investors, said people familiar with the deal. The company and its investors are aiming to raise up to $161 million. Of the total 10.7 million shares offered to investors, 3.57 million are coming from Weston Presidio, a San Francisco private-equity firm that controls about 43% of Fender's stock.

Write to Shira Ovide at shira.ovide@wsj.com and Ben Worthen at ben.worthen@wsj.com

Ivan
The Madeira Official Website
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IvanP shared that The WSJ wrote:

The Scottsdale, Ariz.-based company generated revenue of $700.6 million and net income of $19 million for its fiscal year ended Jan. 1.

Wikipedia wrote

Net sales (revenue)
– Cost of goods sold
= Gross profit
– SG&A expenses (combined costs of operating the company)
= EBITDA {Earnings before interest, taxes, depreciation and amortization}
– Depreciation & amortization
= EBIT {Earnings before interest, taxes}
– Interest expense (cost of borrowing money)
= EBT {Earnings before taxes}
– Tax expense
= Net income (EAT) {Earnings after Tax}

So after $700M in sales & income they pocketed $19M... 2.7%.

This could get real interesting. Many ways to drive the numbers, and I'm pretty sure when a / as a publicly held company, the numbers will be driven.

One could argue that they've been in it for the love of the art. Not many would win a convincing argument that 2.7% is a racketeering venture.

Here's to an exception to most business models - where at the end of the day, margins count. A lot. May Fenders success be defined more by top line growth (revenue) and less by margin growth (cost management), else we'll likely experience another CBS-like era. (In reality, it will probably be both.) But hey, on the bright side - that'd mean anyone with some of that AVRI stuff getting high praise for top quality lately could eventually be coveted at as "Pre-IPO" Smile

fady

Last edited: Jul 11, 2012 09:47:44

It's interesting that the iconic market leader in guitar equipment will have a company valuation of about $400 million post IPO.

This makes it a pretty small, small cap stock.

Compare that to other American consumer product icons like Coca-Cola ($175 billion dollar market cap), Procter & Gamble ($169B), Disney ($85B), etc.

This says something about the economics of the music industry in general.

Paul

That is indeed a surprisingly, even shockingly, low profit - both in absolute and relative terms. Well, there are many out there fond of accusing the modern Fender corporation of just caring about profit and not about musicians. I can't say much about the latter, though it doesn't seem plausible given what I know about the company, but the former is clearly not the case.

Ivan
The Madeira Official Website
The Madeira on Facebook
The Madeira Channel on YouTube
The Space Cossacks on Facebook

The first thing I thought of was how Harley-Davidson did almost exactly the same thing involving AMF. There are many similarities between the two comapnies. It worked out pretty well for Harley.

This is Noel. Reverb's at maximum an' I'm givin' 'er all she's got.

The stock is going to trade at a discount to sales, which is not unusual for consumer discretionary companies.

The opportunity (or not) as an investment will be in increasing those margins and elevating the price/sales ratio.

If you look at the Custom Shop part of the business, you see developments along those lines.

The CS has dramatically reduced the number of Time Machine series guitars that are produced.

Instead, they have focused the product lines in recent years on Limited Run and Masterbuilt guitars.

They have also eliminated many of their small to mid sized dealers. This is very unfortunate from a local instrument tryout standpoint (sad to see it at Buffalo Brothers), but they seem to be driving more volume through fewer Showcase dealers.

So, effectively, they have reduced the supply of guitars and the distribution points. What has followed over the last two years has been a significant increase in prices, particularly in the Team Built models.

This year their focus appears to be on getting Masterbuilt prices higher. MB guitars have generally been around $5K, but are now being pushed over $6K or more.

That's how they are trying to move margins up, at least in the CS.

Paul

"... else we'll likely experience another CBS-like era." Onslow, you might have something there.
I worked at CBS in the mid-late 70s. I heard some great stories about CBS' takeover of Fender guitars.
Several "suits" at CBS told me this:
Leo Fender gets his cash and goes bye-bye. OK, so slowly over the ensuing years the empty suits and bean counters decide to apply some judicious Quantitative Busines Analysis or some such thumb-up-the- sphinter poop to Fender -in this case, the wood department. So they ask the manager (a holdover from pre-1965 Fender) as to how he determines when to order more wood. "Vectors" and "Metrics" such as order points, wood loss, production numbers - blah-blah-blah are brought up. The wood manager rolls his eyes, takes the suits out to the wood pile. He tells them - "When the wood pile gets low, I order more wood". Well we can't have that. So CBS/Fender changed things. And we all know how that panned out (Hint: the 70s Fenders couldn't suck enough.)
You can't make home bread in a factory complex. I hope history doesn't repeat itself.
J Mo'

Yup. Craigslist ad: 2012 Fender Strat in pre-IPO fiesta red. Original 11 screw pickguard with solid body made entirely from wood. Models of this era included 6 tuners standard. Non-tupperware OHSC.

J/k, guitars are likely to be cool for a long time to come and Fender still puts out my favorite product. Hmm, stock purchase or an AVRI???

I'd be curious to see the valuation of other companies, like Gibson and Ibanez.

Shawn Martin
http://www.drummerman.net
http://www.youtube.com/GKacedrummerman
http://www.facebook.com/drumuitar

Don't get me wrong, I love Fender guitars and basses. But personally I think this IPO has "loser" written all over it. A blatant way for the current private owners to cash out at the top. I never like to participate in that kind of thing. The current owners are taking profits for a reason.

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