We’re not going to cover every IPO, although with the way the market went in 2008, it probably wouldn’t be too hard, but this one caught our eye. It’s got porn, religion, and BigLaw – some of our favorite things.
FriendFinder Networks, the online media arm of the Penthouse media conglomerate, filed its preliminary registration statement on December 23. In fact, FriendFinder was known as Penthouse Media Group until recently – a name change for which it admits it failed to obtain its noteholders’ consent in violation of certain covenants (read the Risk Factors). Penthouse acquired FriendFinder’s parent just about a year ago for $500 million and is looking to raise $460 million in the IPO.
The IPO includes a number of sites, the most popular of which is apparently adultfriendfinder.com (NSFW=no link), an adult dating site and social network. One of its key assets is the exclusive license for various Penthouse marks. FriendFinder covers all its bases, though: in addition to the basically pornographic adultfriendfinder.com, one of the properties is bigchurch.com, a Christian-themed dating site on the same platform.
More about the company’s dire straits (including the reason they’re rushing to do the IPO in a terrible market), plus the BigLaw connection, after the jump.
FriendFinder claims $244 million in net revenue for the nine months ended September 30, 2008 – against just $27 million for the same period prior year (i.e., pre-acquisition), which led to a $32.3 million net loss, but EBITDA of $48 million. Stockholders’ deficiency is $44.5 million. It’s not pretty over there (no pun intended).
Why, you may ask (as we did), would anyone be taking an internet portal public right now? Our beloved Risk Factors section provides some insight:
Our financial statements include an explanatory paragraph concerning conditions that raise substantial doubt about our ability to continue as a going concern, and there is no guarantee that we will be able to continue to operate our business or generate revenue.
Ahh, the dreaded “going concern” warning. I’m not too familiar with those in registration statements – are they common?
Anyway, FriendFinder is already in default and has failed to obtain some waivers (including the name-change consent mentioned above). If the IPO doesn’t go through, up to $466 million could come due, which it doesn’t have the cash to pay.
Bruce Mendelsohn (Maryland-College Park BS ’74, Maryland JD ’77), of Akin Gump, represented the issuer. Skadden corporate partners Richard Aftanas (Manitoba BA ’91, McGill LLB ’94) and London-based Rick Ely (Cornell BS ’85, William & Mary MBA ’85, NYU JD ’88) represented Renaissance Capital, the underwriter. None of the lawyers has listed this deal on his brag sheet yet.
Renaissance is registered in Cyprus and describes itself as:
founded in 1995 as a Moscow-based investment bank. It has expanded significantly this decade to become the preeminent specialist in high opportunity emerging markets, with a presence in Sub-Saharan Africa and the Middle East as well as Russia and the CIS.
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I swear to god I thought I was on BigChurch.com when I solicited that young man. I had no idea I was on FriendFinder.
I swear to god I thought I was on BigChurch.com when I solicited that young man. I had no idea I was on FriendFinder.