View Full Version : Gibson Going Public

Jan-30-2004, 9:36am
So Gibson's going public. Whether you love them or hate them, they are the leader in the mandolin producing world.

Stock-ownership, however partial, is rare in instrument-building companies if it exists yet at all.

Any speculations of what effects the mandolin world might feel as a result of this move?

Jan-30-2004, 10:28am
One thing to remember is; Gibson is not a Mandolin company. It is a company that manufactures Les Pauls, Mastertones, J-200s, etc. etc. and probably other products and services that I know nothing about. The diversity of the Gibson corporation is one reason the company still exists. If the Gibson company had to rely on mandolins would it have survived the 1930s? the 70s?
The "duty" of a public corporation is to make money for the stock holders. If the demand stays high for mandolins, you may not see much change.
The extreem situation might be- mandolin demand drops, sales lag, production moves overseas, production of whatever is fashionable this week goes up, stock prices go up, business success!
If Gibson actually goes public, there's no predicting what will happen, but it will be another chapter in the history of a company that has been through a lot of changes for a lot of years.

John Flynn
Jan-30-2004, 10:47am
Positives: An IPO gives you cash you can work with, to modernize facilities, acquire other companies, etc.

Negatives: Expectation of shareholders tends to favor high-volume, high turnover product lines. It puts real pressure on artisan/craftsman type operations. Corporate management has to really fight to keep operations like that alive. Sometimes they do it, sometimes not.

There is no way to predict the actual outcome. That will be up to the new board of directors. Likely possibilities would include: More Mandobirds, less emphasis on OAI, more R&D on new products that would appeal to mass audiences. Possible acquisitions of other manufacturers. There will be pressure to move to more offshore and automated operations.

Jan-30-2004, 11:02am
Positives: An IPO gives you cash you can work with, to modernize facilities, acquire other companies, etc.
pay lawyers..........

Jan-30-2004, 11:29am
Good summary of pros and con's already put forth. A lot has to do with the plans for the cash infusion; post IPO. Will the cash be used to obtain partial liquidity for management, to use as a war chest for acquisitions, to pursue product development, or something else? The S1 document should reveal this.

One thing for sure is that there will be a lot more of a short-term focus. Public company stock prices live or die based upon their ability to meet quarterly earnings estimates.

If Gibson goes public, hopefully, Charlie's mandolin division will be able to continue its great strides in making wonderful instruments.


J. Mark Lane
Jan-30-2004, 3:34pm
In thinking about the history of some great American companies that have gone public, the first thing that comes to my mind is Harley-Davidson. Great story. I daresay, the quality of the bikes has improved significantly, and the aesthetics have not been sacrificed.

Jan-30-2004, 3:45pm
I'm thinking that all oval-hole lovers should unite to buy a majority share, and get those A through A-4s, F-2s and F-4s back in production!

Jan-30-2004, 3:48pm
Is fender public? It kinda is a scary thing for the OAI I would think. Just as in the 20's the mandolin thing didn't last too many years. You never know when things will change, only that they will. "these are the good old days" better go buy a MM while you still can. Soon they'll have made in Mexico or pac rim on the label. The publicly traded company has to answer to the stockholders in PROFITS. If Grandma's mutual fund is holding the stock the fund manager and gandma expects it to perform better than the bank. I think I hate the unknown. ( do I really want to comment on this?)

Jan-30-2004, 7:46pm
Gibson is now a musical conglomerate of sorts. I think they own a well-known piano company and an organ manufacturer, both of whom operate under their original brand names. Maybe there's even a band instrument division...I forgot what I read about this recently.

As a privately-held company, the owners might tolerate "image" products or "loss leaders" that nonetheless result in many sales of lower-priced products. Public companies are less prone to do that. So if OAI is legitimately making money, they'll still be there, though the product mix might change if there are margins to be gained. If OAI is losing money, those changes would likely come a lot faster. However, it seems like Gibson already operates more like a public company than any other maker you can name (that isn't public already), so the changes may be more subtle. Who knows? Music companies, like golf companies and other hobby-related deals, have never been great investments for shareholders.

Jan-31-2004, 12:34am
The rumors of going public have been circulating for a very long time. While it could happen at any time, there is no way to speculate at to if or when with any degree of accuracy. The more important thing to remember is even if it were to go public we would not likely see much of an impact on our division. We may even see things get a bit easier with a publicly traded company. We have near impossible numbers to reach in each division already. That is not going to change even if ownership changes. We are near production capacity with our current setups. Anyway, the real issue is not the crystal ball theories of the future but what we can do today to make our products and services better. That is something we constantly work on. So, who knows what tomorrow brings, but what ever it is, we will face that when the time comes.

mando bandage
Jan-31-2004, 8:28am
In thinking about the history of some great American companies that have gone public, the first thing that comes to my mind is Harley-Davidson.

And if I'd bought that stock like I was tempted to, I would have a 500% ROI.


John Flynn
Jan-31-2004, 9:40am
Harley Davidson may not be a good comparison. It didn't really go from private to public in recent times, like Gibson will. It was public until 1969, when it was getting killed by foriegn competition and a rep in the marketplace for bad quality. It was forced to merge with AMF Corp. to stay afloat. In 1981, the management of the Harley Davidson Division of AMF did an IPO to spin Harley off as a seperate public company once again. It almost immediately had to get tariff relief from the FTC to keep from going under again. Finally they turned it around with a serious Total Quality Management campaign and some great marketing. Now it is triving, but it spent a couple of decades on "financial life support" before it got there.

Charlie Derrington
Jan-31-2004, 9:48am
Let me put it this way........

I'm not going to worry about it. I doubt if the "flagship" of the line has too much to be concerned about. I think companies have learned from Coke not making "Coke".

Charlie http://www.mandolincafe.net/iB_html/non-cgi/emoticons/biggrin.gif

J. Mark Lane
Jan-31-2004, 12:06pm
Johnny, good points, but I think you have it a little wrong. #

Harley was publicly traded in the 1960's, but was acquired by AMF in 1969. #It was not publicly traded as Harley after that. #In 1981, there was an LBO, initiated by management of Harley, and the company was purchased from AMF by such management. #The tariff relief was indeed requested, and granted, in 1983. #(Not a particularly unique thing in connection with imports and competition in American manufacturing.) #The tariff relief was arguably in response to unlawful marketing practices by Japanese manufacturers, but that's another story. #At any rate, the tariff relief was granted while the company was privately held.

The company did go from being privately held (after the LBO) to being publicly traded as a result of an IPO in 1987, six years after the LBO and four years after the tariff relief. #That same year, 1987, Harley requested that the US Govt stop the tariff protection, in a demonstration of faith in the free market system. #

So, they did go public in recent times, and they have not had the tariff protection as a public company. #And during that time of being publicly traded (without tariff protection), they prospered and increased quality dramatically. #And they have built some of the most beautiful machines in the company's history during that time. # #

But my point was really that being publicly traded does not necessarily mean the end of quality. #My apologies to Scott for this digression....


Scott Tichenor
Feb-01-2004, 12:00pm
Gibson Guitar on the Edge (http://www.tennessean.com/business/archives/04/01/46246977.shtml?Element_ID=46246977), from the Tennessean.com

Feb-01-2004, 12:19pm
I worked for a smaller graphics software company for several years... they made great products, had a very loyal consumer base, and were continually profitable. #Then they were merged into another (pubic) company who decided that the company could take on Adobe. #That they would become as industry standard and as profitable. #I remember sitting at a company Christmas party where the CEO announced we were going to be a billion dollar company, rather than in the millions. #Sounded great. #

Didn't work out that way, the company is now gone, along with all those great products and the great customers who supported them. *sigh*

Sure, it'd be great to see Gibson go from $250 million to 3 billion. #But, man... that's a BIG jump. #I just hope they don't make the wrong sacrafices on the way to get there. It'd be a shame.

Scott Tichenor
Feb-01-2004, 12:44pm
I'd always hoped Bill Gates would start playing mandolin in the hopes he'd pull a leveraged buyout of the Cafe. $1.2 million would probably sway me into giving all this up.

...or a few fights to break out on the message board. That'd do the trick too.


Feb-01-2004, 1:15pm

Thanks for the link to the article.


The "man" answered all the questions in two words:


"Day Is Done
Gone The Sun..."

Enjoy the Super Bowl


Nick Triesch
Feb-01-2004, 1:18pm
This is not a bad thing guys. Think how fun it will be to look for pre public late 1990's-early 2000 Gibsons. Kind of like Pre CBS fender guitars or pre Voit Harleys. Or pre Gibson Flatirons! All highly prized by collectors. Music folks are funny people, They will want the real thing. Nick

Feb-01-2004, 1:21pm
Here's the actual quote from the endo fo a paragraph far down in the article:

"We're in business to be commercially successful,'' he [J] said.


Feb-01-2004, 1:28pm
mandocat, I think you may be right. A MM might turn out to be a better investment than Gibson stock!

Christopher Howard-Williams
Feb-01-2004, 4:18pm
Not a word about current mandolin or banj* production in that article. Can anyone say what per cent of total sales mandos represent for Gibson? Probably not much - which could be good (leave alone) or bad (get rid of) in case of an IPO.
Better get that order in for a distressed MM now!! http://www.mandolincafe.net/iB_html/non-cgi/emoticons/coffee.gif

Christopher Howard-Williams
Feb-01-2004, 4:27pm
I used to work for Salomon ski company when they just made ski bindings - small, but world leaders (and highly profitbale) in ski bindings. Georges Salomon announced that the only companies to survive would have to make bindings & boots & skis. So Salomon did. Then they wanted to take on Nike and co. Now they belong to Adidas.
Every market does it - you get the majors and the niche players. Gibson pretty much has to be a major now and that means getting bigger and being everywhere on the market. Hopefully also in the niches such as high quality mandolin manufacturing. I don't really see why they should go public though. They're doing just fine from here...

Feb-02-2004, 1:58am
An UGLY vision as on so many shareholder returns priority companys is when dividends are more important than employees, Imagine 2 Epiphone companys both made in China, only one is labeled Gibson.

The USA can be remamed 'Wallmartistan'