Aug. 29, 2002
LOUISVILLE, Ky. -- Like clockwork, each time Domino's Pizza posts a positive quarterly report, the rumor mill starts grinding out promises that the Ann Arbor, Mich., company is going public.
According to an early-August report, Crains Detroit Business said that a source close to Domino's told it that all the paperwork is ready. Reuters also reported this month that its sources said a float of the world's second-largest pizza company would happen before the end of the month.
Well, the end of August is nigh, nothing's happened, and no one's talking at Domino's and Bain Capital (the Boston-based private equity firm that bought a 93-percent share of Domino's in 1998). That could serve as some proof that a float isn't in the offing in the near term, and here are some possible reasons why.
The year 2002 has been a tough one in the U.S. initial public offering (IPO) market. According to an Aug. 28 Reuters report, soft receptions to public offerings led to the withdrawal of $4.1 billion worth of IPOs in July alone.
According to Reuters, billion-dollar offerings such as Merck & Co.'s Medco prescription-benefits division and St. Paul Cos. Platinum Underwriters division stirred little interest among investors. Tyco International's finance arm, CIT Group, did take the public plunge, but at $23 a share, well below the $25 to $29 range it wanted. Plus, the offering raised only $4.6 billion for the unit, half the price Tyco paid for it in 2001.
There currently are no U.S. IPOs scheduled for the week of Aug. 26, though Reuters' sources said activity may pick up in the second half of September, once investors get beyond the anniversary of the Sept. 11 terrorist attacks.
John Brand, an analyst with Dealogic, a research firm that tracks IPOs, told Reuters that once that milestone is passed, there's a backlog of deals -- 59 IPOs -- filed and waiting. Still, he added, if the current mini-rally on Wall Street doesn't hold, it's likely some of those potential offerings will be withdrawn.
Domino's paperwork is not among that backlog, as it has yet to file its S-1 registration form with the SEC. Once the form is filed, along with a preliminary prospectus, the SEC must examine the document to be sure there is sufficient information describing the company's business plans and current financials.
Sources who spoke confidentially to PizzaMarketplace said that process can take two to six weeks, depending on the workload at the SEC. Additionally, said one source, given the numerous and ongoing accounting scandals at many publicly traded companies, the SEC will be looking for "squeaky-clean books," and that could slow down the overall process.
Once the SEC reviews the company's prospectus, it typically requests more information -- sometimes a lot, sometimes very little. One source said the company has to provide that information to the SEC's satisfaction through an amended prospectus. SEC response time to the amended version, however, typically is quick.
Were Domino's prospectus to gain SEC approval, then it would be free to launch what is commonly called the "road show." Here, a company's officers, along with underwriters and investment bankers behind the company's IPO, visit institutional investment firms to promote the potential offering and gauge whether anyone's interested in buying their stock.
If the road show goes well, the IPO could follow in as little as a few days.
All in all, said John Fitzgibbon, editor of IPO industry newsletter 123Jump.com, until a potential offering gets to the road show stage, investors needn't heed rumors about who's filing next.
"What we have going on, in a nutshell, is nothing, which is not unusual this time of the year," Fitzgibbon said to Reuters. "We're waiting for the lifeblood of the IPO market to improve -- the stock market."