Angie’s List faces challenges in bid to go public

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Consumer review provider Angie’s List said in its filing to go public that it faces several challenges, most notably that it has lost money since its founding 16 years ago.

The Indianapolis-based company filed papers on Thursday for an initial public offering of stock, pegging the value of the offering at $75 million.

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.

The company noted that it will continue to lose money for the foreseeable future.

“We are and will continue to be faced with many competitive challenges, any of which could adversely affect our prospects, results of operations and financial condition,” Angie’s List said in the filing.

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.

The concern, he said, is whether recent weak market conditions will support the company’s attempt to raise $75 million.

“This will be a good barometer on the market, to see whether this [filing] gets traction,” he said. “The market, for sure, would have been much more receptive to that prior to this terror period we had a few weeks ago."

Angie’s List said in its filing that most of its recent losses are the result of increasing investment in new membership.

If revenue generated by new memberships differs significantly from company expectations, or if membership acquisition costs increase, the company may not be able to generate profits from the investment, Angie’s List acknowledged.

Angie's List said it plans to continue aggressively investing in national advertising to deepen its market penetration, particularly in New York City and Los Angeles. It also noted it is expanding into new categories. The company started by focusing on home improvement services, and now covers categories such as health and wellness services, and car restoration.

The company said that if it is unable to replicate its performance in larger markets, its operating results and financial condition will suffer.

Net proceeds from the IPO will be used to fund its advertising strategy and for general corporate purposes, the company said.

Investors could be attracted to Angie’s List on the prospect that it might become profitable if it receives a capital infusion, Millard said.

“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?”
Angie’s List was founded by Angie Hicks in April 1995 as Brownstone Publishing LLC and is located at 1030 E. Washington St.

The company’s IPO announcement is the third in Indiana this year.

Indianapolis-based Allison Transmission in March said it planned to raise $750 million through a public stock sale. One week later, Pendleton-based Remy International Inc. outlined plans for a $100 million IPO.

It's been nearly two years since an Indianapolis-area company completed an initial public offering.

In December 2009, Carmel-based KAR Auction Services Inc., an auctioneer of used and salvaged vehicles, sold 25 million common shares at $12 each for total proceeds of $300 million.

Statewide, West Lafayette-based Endocyte Inc., a developer of cancer treatments, in February 2011, raised $75 million by selling 12.5 million shares at $6 each



  • valuation
    Potential is clearly there. Year over year growth is double digit (%). That alone makes me want to know more. And I like that their timing is off (as an investor). They need cash at worst possible time.
  • Trey1
    I agree with you on the prolonged indifference to turning a profit. I think the "16 year" note will be the elephant in the room come rally time. However, I do think their aggressive market strategy and constant consumption of new subscribers will bode well for them at the end of the day.... or rather decade. Remember, it took Amazon 7 years to report a quarterly profit, of course, apples to oranges, but none the less, I see their subscriber growth as the asterisk on the balance sheet.
  • Assumptions
    Another great assumption about something that you clearly do not have knowledge of. I'll leave it to you to recall what occurs when you make assumptions.
  • thanks james
    Thanks for clearing that up for me James. However, I'm sure your someone who couldn't afford to invest even $1 in any company...good or bad
    • Banana Republic
      What is their business model? Why in the hell is this banana republic Mayor and Govenor doing?

      There are plenty of other local companies with better track records and opportunities?

      Why does Mayor Marine get to decide who gets a government handout? Smells really fishy. I suppose Keystone Construction will get contracts out of this as well.

      Can I simply get the streets in my neighborhood fixed.... A basic govt service?
    • Hmmm
      Although the IPO is new, the company has been around for 16 years. I'm not sure this an "on at the bottom floor" situation. It's more of a get on an elevator stuck at the bottom floor for 16 years situation.

      Regardless, in preparation for this IPO, AL has been very heavily advertising. I expect to see much bigger losses in the near future as a result.
    • Cha-Ching, more advice please...
      I would really enjoy some additional savvy investment advice Ben. Yes, a company that "loses money" can be a great investment, particularly while they are losing money. Maybe the concept of the IPO is lost on you, but in part, at it's most basic form, it is an "on at the bottom floor" type situation. In other words, who wants to purchase over-valued stock from AL after they are public for 10 years and raking in the cash... well, I guess who else other than you. I can't say whether or not they will be successful, raise the capitol, or turn profits in the foreseeable future. I can however say that I believe their investment strategies are flying straighter than yours and other one-liner individuals who like to mock something they do not understand.
      • Question
        Are Angie's List CFO Robert Millard and Barnes & Thornburg's David Millard related to each other?

      • cha ching...
        A company that loses money? That sounds like a perfect investment! Can't wait to jump in on that IPO!

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      1. Apologies for the wall of text. I promise I had this nicely formatted in paragraphs in Notepad before pasting here.

      2. I believe that is incorrect Sir, the people's tax-dollars are NOT paying for the companies investment. Without the tax-break the company would be paying an ADDITIONAL $11.1 million in taxes ON TOP of their $22.5 Million investment (Building + IT), for a total of $33.6M or a 50% tax rate. Also, the article does not specify what the total taxes were BEFORE the break. Usually such a corporate tax-break is a 'discount' not a 100% wavier of tax obligations. For sake of example lets say the original taxes added up to $30M over 10 years. $12.5M, New Building $10.0M, IT infrastructure $30.0M, Total Taxes (Example Number) == $52.5M ININ's Cost - $1.8M /10 years, Tax Break (Building) - $0.75M /10 years, Tax Break (IT Infrastructure) - $8.6M /2 years, Tax Breaks (against Hiring Commitment: 430 new jobs /2 years) == 11.5M Possible tax breaks. ININ TOTAL COST: $41M Even if you assume a 100% break, change the '30.0M' to '11.5M' and you can see the Company will be paying a minimum of $22.5, out-of-pocket for their capital-investment - NOT the tax-payers. Also note, much of this money is being spent locally in Indiana and it is creating 430 jobs in your city. I admit I'm a little unclear which tax-breaks are allocated to exactly which expenses. Clearly this is all oversimplified but I think we have both made our points! :) Sorry for the long post.

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