This is one of those days where I realize I don't understand anything about finance or capital markets. I'm a dinosaur. I don't get it. People are saying things like "this time is different" again in news articles about initial public offerings by Internet companies, and they mean it. All I can do is watch, dumbfounded.
Today a 16-year-old company that loses money called Coupons.com Inc. went public. Had I been paying attention to Coupons.com sooner, I might have guessed after the disastrous post-IPO performance of Groupon Inc. that investors' appetite for yet another online-coupon company would have been sated. But no, that would have been wrong.
Coupons.com, with Goldman Sachs as its lead underwriter, raised $168 million, selling 10.5 million shares for $16 each. And the stock rose as much as 103 percent to $32.43, making it today's biggest gainer by far. If that doesn't remind you of 1999, then you probably weren't following the stock market back then.
The company has about a $2.3 billion stock-market value, which is more than 13 times its $167.9 million of revenue last year, when its net loss was $11.2 million. But like so many other companies in these golden times, Coupons.com simply told investors to exclude about $13 million of normal everyday expenses and, abracadabra, it claims to be profitable on a nonstandard, cockamamie "adjusted Ebitda" basis. It's all part of the show.
One of the popular themes during the late 1990s dot-com bubble went like this: "It's dumb for startups to show profits, because then investors might get some sense for what their limits are. So go ahead, lose money. The worst thing you could do is have a denominator in your price-to-earnings ratio that's greater than zero, because then your ratio would be positive, assuming your stock hasn't gone to zero yet. But if you lose money, that's terrific, because it means the sky's the limit."
A lot of people bought into that concept, especially investment bankers and easy marks who signed up to take a flier on the greater-fool theory. But that rule about losing money applied to start-ups. It didn't apply to companies that had been around for 16 years and still were losing money. Because if a company is still around after 16 years, it's not a startup. It should be making money if it wants to go public. It should be making money, period. Or at least that's how it worked in the old days when IPOs were for real companies with real profits.
Coupons.com has incurred net losses since its inception in 1998. It had an accumulated deficit of $168.8 million as of Dec. 31. The money the company just raised is only about $1 million less than that figure. So you have to at least admire the symmetry. Maybe in another 16 years, Coupons.com can come back to the markets for more money and do it all over again?
This is where that first idea I mentioned comes in. There must be something wrong with the way I'm wired. I obviously don't get this. But Mr. Market does, whether you choose to imagine him as a man of great efficiency or as a hopelessly addicted angel-dust addict who has a habit of running into burning buildings and defenestrating himself every few years.
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(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter at @JonathanWeil.)
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