07.20.12
Hoist on own petard
From the wire, Fender Musical Instruments shelves its IPO:
Fender Musical Instruments announced Friday that it would be withdrawing its planned initial public offering (IPO) based on current market conditions.
“Current market conditions and concerns about economic conditions in Europe do not support completing an initial public offering at what we believe to be an appropriate valuation at this time,” said Larry E. Thomas, Fender’s Chief Executive Officer, in a statement …
After going public, the company was hoping to have roughly 26.4 million shares outstanding. This would have valued Fender at about $395 million, but that all goes out of the window now.
By gross tonnage, most of Fender Musical Instruments’ guitars and amplifiers are made in China and Mexico. Its US manufacturing is essentially an artisan and snob business, priced for the high end for music professionals, people on label contracts and people who perhaps played when they were young, but then went into lawyering or banking and want a piece to impress people.
However, guitar players — young to old — are not, on average, a wealthy bunch. And the lousy economy has hit musicians hard. There aren’t any deep pocketed men on the staff at Guitar Center, walking the showroom floors nationwide.
So the idea that everyone who owns a Fender-branded guitar or amplifier would buy stock to have a piece of the company is laughable. Guitar players aren’t part of the investing class, not even as hobbyists.
Which would largely leave Fender stock to those who buy its artisan custom shop goods. Yet Fender is also very definitely not Harley-Davidson, the iconic US motorcycle manufacturer.
With its off-shored manufacturing hitched to the low and middle ends of the market, those segments where consumers were the most blasted by the economic collapse and subsequent loss of jobs and dollars, Fender Musical Instruments did what it had to.
Fender — from the archives.