Bubble Time: Tiny Company, Barely Any Revenue, Expects To IPO
from the where-have-we-seen-this-before... dept
Remember back in the bubble years where startups that were barely a year old and had no revenue could go public at huge valuations? Maybe they really are coming back. We had thought that when Buy.com had postponed its IPO that maybe Wall Street hadn't returned to the bubble-era thinking of the dot com boom years. However, it looks like some companies are really pushing to bring back the insanity. Sean Ryan has a blog post up discussing a tiny startup named Digital Music Group that is trying to go public -- but which raises all sorts of questions about how the company could have possibly gotten as far as it has in the process. The company is in a highly competitive space (licensing music for digital downloads) where they're hardly the biggest player (they're way down the list, actually). It's also a bad business to be in: trying to be a middle man in a space where margins are tight and they're a prime target to get squeezed out. They're almost totally reliant on one channel: Apple's iTunes which accounts for about 80% of their "sales." Those, in general, should be warning signs, but the real kicker (and the reason "sales" is in quotation marks) is that the company isn't earning much money at all -- and yet wants a tremendous valuation. According to its latest filing it brought in about $235,000 in the third quarter (and lost well over a million dollars) -- but thinks it deserves a $270 million valuation. Yes, this is a company that has barely earned over $500,000 in its entire lifetime and thinks it's fairly valued at $270 million dollars. Ryan also notes that just four months ago the company valued its own stock at $0.01/share as opposed to the $8 to $10 per share it seems to be expecting at IPO. It's amazing that anyone at the company thinks they'll pull it off, and if they really do go public, it's a sure sign that some sort of bubble is back.
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Can you say Kozmo?
This has all the earmarks of one of those, "Let's go public and get rich, then sell the company!" startups from the turn of the century. Anyone who puts their money here deserves to lose it.
Is Stephan Paternot involved, by any chance?
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stupidity?
Or that investers are just plain stupid
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Let the Market decide
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Bubbles!
Fortunately, I only spent a few cents on them. Unlike some who manage to loose millions.
I wish I had millions to spend on bubbles...
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Bubbles!
Fortunately, I only spent a few cents on them. Unlike some who manage to loose millions on their bubbles.
I wish I had millions to spend on bubbles...
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Re: Let the Market decide
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longer tail than you think...
Here's an example of one of Carinco AG's products (one of the labels with an agreement with DMI). I think the term du-jour is "long tail", and I think there's certainly a demand for this material.
Hasn't Techdirt waxed about finding your niche??
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No Subject Given
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No Subject Given
Just like companies being overvalued during the Bubble, certain people were overvalued and he is definitely one of them. He should be a mid-level programmer at some no-name software company.
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I would rather invest in these bubbles
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Re: Let the Market decide
Hmm. I think you're confusing what "the market" is. I'm all for letting the market decide, but part of letting the market decide is helping the market have as much information as possible. This post was designed to get more people to know some of the details about this company to let the market decide.
Nowhere did I advocate having the government step in and stop this company from doing what it's doing, did I?
The market certainly includes "marketing" and the ability for people on either side to spread information about any possible transaction so that people can make a better decision. That's all we were doing. Trying to provide more information so that people perhaps avoid making bad decisions based on bad information. That's still letting the market decide.
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Re: longer tail than you think...
Hasn't Techdirt waxed about finding your niche??
Er. I think you're confused about what my complaint is. I have no problem with a company finding a decent and profitable niche and raising money by going public. I'm just pointing out that (a) it's EXTREMELY early for this company to go public as they haven't proven anything and (b) the valuation is ludicrous.
None of that disagrees with what you've said. I'd rather see the company prove itself. If it needs money, the private markets are the way to go for now, and it can go public later with a proven track record and a more reasonable valuation.
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These...
http://www.zubbles.com
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No Subject Given
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Re: Let the Market decide
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Re: Let the Market decide
Didn't mean to come across as touchy -- so sorry if I did.
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From the profile of...
Mitchell Koulouris
Career disappointment
Not being able to capitalize on the Dot.com boom.
Looks like he's trying to get over that disappointment...
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IP or patents on distribution methods?
Note their Digital Onramp
Thoughts? Looks like they also have some relation to the Tower Records group?
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sad
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