"Ready for dinner"
Slashdot — the self-proclaimed “News for Nerds” Web site that serves as one of the Net’s most popular clearinghouses for Linux/open source/geek fetish info tidbits — is in the “quiet period.” Slashdot’s corporate owner, Andover.net, filed for an initial public offering Friday, hoping to raise $50 million via the stock market. As a consequence, all employees of Andover.net, including Slashdot founders Rob Malda and Jeff Bates, must abide by Securities & Exchange Commission restrictions forbidding them to talk about their company’s future prospects.
As one participant in the Slashdot discussion topic devoted to the Andover.net IPO news noted, “Slashdot in a quiet period — the mind boggles.” Slashdot is notorious for its free-for-all commentary on everything important under the open-source sun — the site is both a breeding ground for open-source idealism and a perpetual fountain of cynical criticism directed at all players in the rapidly commercializing world of free software. Slashdot is where people interested in open source go to get the real scoop — now, suddenly, Slashdot is the scoop itself.
As usual, the prospectus filed by Andover.net with the SEC contained some intriguing goodies — not the least of which is that Andover.net is now styling itself the “the leading Linux/Open Source destination on the Internet.” This is quick work for a network of Web sites that did not include any sites devoted solely to Linux or open-source software until the purchase of Slashdot last June.
And how much did Slashdot go for? According to the prospectus, Andover.net paid $1.5 million in cash at the June closing, with a future $3.5 million in cash contingent on Malda and Bates remaining employees for the next two years. Included in the deal were $2 million worth of Andover.net stock at the opening price set by the IPO, with another $5 million in stock to be disbursed over the next two years, contingent, again, on the continued employment of Malda and Bates as well as “the achievement of certain performance milestones.”
Andover.net claims that its network of nine Web sites “generates over 40 million page views with over 2 million unique visitors on a monthly basis.” These numbers are not broken down by individual sites, but make no mistake, this IPO would be more accurately named the Slashdot IPO rather than the Andover.net IPO. Without Slashdot, Andover.net would not be able to claim that its network was the “leading Linux/Open Source destination.” And without that magic Linux incantation, it’s hard to see what basis there would be for an IPO in the first place.
But what’s really remarkable is how little cash got this ball rolling. According to figures provided in the prospectus, from August to December 1998, Slashdot itself had net revenues of only $18,000. And yet its Internet profile was high enough to justify a selling price of $5 million in cash and $7 million worth of stock. Then, in turn, Andover.net’s purchase enabled it to go after $50 million in an IPO. Ya just gotta love the Internet economy.
And $50 million might be only the beginning. Andover.net has chosen to use W.R. Hambrecht’s Open IPO strategy for going public. The Open IPO model allows individual investors to bid what they think a stock is worth. After all the bids are in, the opening price for the stock offering is set at the highest number that will allow the entire offering to be sold. Theoretically, this allows the company going public to maximize its initial haul.
So far, the Open IPO model (which Salon.com used for its own initial stock offering) has received mixed reviews. But this is the first time an open-source related company has taken the plunge. On Slashdot itself, many discussants have long hoped that open-source companies would employ the Open IPO model because it would allow small-time investors — the kind of people who created most of the open-source software that currently exists — a piece of the action. The Slashdot-