The company’s name is well known—it’s the largest seller of guitars in the U.S. and its Stratocaster, or "Strat," is an icon of rock ‘n roll throughout the world.
And according to its latest filings, Fender Musical Instruments plans to sell as much as $200 million worth of shares in an initial public offering. The company plans to list on the Nasdaq under the ticker symbol FNDR.
However, the company’s iconic status hasn’t always translated into strong earnings. The company’s net revenue came in at $700 million in the 2011 fiscal year, up from $617 million in 2010, but the company barely eked out a profit on that revenue—reporting just $3.2 million net income attributable to common stockholders, compared with a $17.3 million loss in 2010.
Nonetheless, the company has big plans for growth and is keeping a close eye on emerging markets. Fender currently derives nearly half of its sales from outside the U.S., selling products in a total of 85 countries. Looking forward, the company especially sees an opportunity in China and India as guitar-based music becomes more popular there.
Looking at Fender’s financials, I would hold off on purchasing shares in this IPO. There aren’t many musical instrument companies that are publicly traded, but for comparison purposes, Yamaha Corporation (YAMCY) does trade on the Pink Sheets here in the U.S. The company has had a rough time of it for the past three years, and I don’t see a turnaround as likely.
Now, it’s not quite a "real" music company, but I have in the past recommended Activision Blizzard (ATVI), maker of the popular Guitar Hero franchise, in my Quantum Growth service. We made a quick 20% on the stock before bailing and moving on to other fast-profit trades.
Until next time!