Like our Facebook Page Subscribe to LTG on YouTube RSS Feed Contact or Tip Us

Fender Pulls IPO As Stock Is Called ‘Overvalued’

Sean W. Jul 27, 2012 0

’60 Telecaster

The Fender company’s plans to go public have been put on hold as the company has pulled their IPO for market reasons.

The company announced last month their plans to go public.  The monies gained from this would have been used to pay down the $257 million in debt the company currently owns.  The reason for this change is because of market reasons, as stated by CEO of Fender Larry Thomas.  He was quoted saying, “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.”

When the stock was initially looked at by Moody’s Investors Service, it was rated as “credit positive” but another investment advisory company called Cove Street Capital had a different outlook on Fender. Jeffrey Bronchick of Cove Street Capital called the stock overvalued.  He went on to say “It is a much more difficult business than what it was being sold as.  It was highly levered, there was a big question mark on growth and it was priced too high, which makes for a fairly toxic combination.”

Fender is the largest maker of guitars in the world with classic models like the Stratocaster and Telecaster that are a cornerstone to the music industry.  Fender also owns other companies like Jackson Guitars, Charvel Guitars, Guild Guitars, SWR, Tocoma Guitars and more.  The company also recently acquired Kaman music, the company who owns Ovation Guitars, Takamine Guitars, Latin Percussion, Toca, Genz Benz, Gibralter and more.  The primary owner of Fender is Weston Presidio, an investment company, who owns 41% of the Fender.  Weston Presidio was pushing the IPO as a way to cash out of the company.

Just the thought of Fender being in such debt, yet owning this amount of prominent companies is a bit scary.

Via »Fortune