Mercury, a fast-growing tech company based in Durango, is moving toward issuing stock to the public in an initial public offering. Here’s what you need to know:
What is an IPO?
The term stands for initial public offering. It’s when a privately owned company first sells its shares to the public. That’s why an IPO is also known as “going public.”
Why now?
Companies typically issue an IPO for two reasons: When the company’s founders or existing stockholders want to cash out, or when the company wants to raise funds to be used for expansion or acquiring other companies. Sometimes, both factors are at play.
After some softness in the IPO market in 2012 and 2013, more companies are moving toward going public.
How does it work?
On Dec. 13, 2013, Mercury filed a draft registration statement with the Securities and Exchange Commission, the federal agency that regulates stocks. Then on March 28, Mercury filed what’s known as a Form S-1. This form includes a prospectus for potential investors.
Mercury intends to be listed on Nasdaq, a major stock index that focuses on tech companies. The company’s proposed ticker symbol is “MPS.”
Three major banks, J.P. Morgan, Barclays and Morgan Stanley, are underwriting Mercury’s IPO.
Companies that are moving toward an IPO typically embark on a “road show” to interest investors. The road-show period serves to drum up interest in the stock offering.
Mercury said it does not intend to pay dividends on its Class A common stock for the foreseeable future.
What is Mercury’s history?
Mercury was founded by brothers Jeff and Marc Katz in 2001 in Brewster, N.Y. The company moved to Durango the next year.
It quickly found a market for its high-tech payment-processing model. The company is one of La Plata County’s largest employers, and is often cited by local boosters as a private-sector success story.
Mercury got the ball rolling toward an IPO in 2010. That April, a California venture-capital firm, Silver Lake, bought a large share in Mercury, amounting to a stake of just more than 60 percent. Silver Lake has extensive experience shepherding companies toward an IPO.
Matt Taylor, a Fort Lewis College graduate and an early Mercury employee, has served as CEO since 2009. Taylor was groomed for the position, previously serving as chief operating officer.
Mercury in 2013 had net revenue of $237 million, according to the SEC filing. It had about 600 developers and 2,430 dealers by the end of 2013. Mercury put its market capitalization at $112 million.
The company had 646 full-time employees by the end of 2013, mostly in Durango and Denver.
The company is preparing to move into a new corporate headquarters in south Durango this year. The building is financed by a $10 million loan.
When will the IPO occur?
A precise date has not been made public. The road show cannot begin until 21 days after the S-1 filing March 28, and road shows typically lasts two to three weeks. That could put the IPO sometime in May.
What are the risks for Mercury’s business?
Mercury listed several “risk factors” in its SEC filing. These include competition with larger firms with deeper pockets, dependence on nonexclusive developers and dealers to market Mercury’s services, liability resulting from unauthorized disclosure or impermissible use of data or service disruptions, consolidating or restructuring in the industry and exposure to economic conditions that affect consumer and business spending, among others.
Who stands to benefit?
Investors will benefit if the stock increases in value following the IPO. Major shareholders also could make money on an IPO, including founders Marc and Jeff Katz, investor Larry Stone and CEO Matt Taylor.
The IPO could inject some millions of dollars into Durango’s economy, providing a wider benefit for service industries. It also could fund further hiring at the company.
cslothower@durangoherald.com
