Martha Stewart joins IPO craze
The crafts maven is the latest to get on the Internet IPO bandwagon, teaming up with venture capital firm Kleiner Perkins Caufield & Byers in a public offering for her media company.
Martha Stewart Living Omnimedia filed to raise up to $100 million in the offering. However, the company did not specify the number of shares it would sell or set a price for them.
The move by Martha Stewart Living appears in part to be an attempt to revitalize the company's Internet efforts. Despite being online for nearly two years and having highly profitable stakes in publishing, television, and branded merchandise, the company's Web site has made little splash.
But in its regulatory filing with the Securities and Exchange Commission, Martha Stewart Living emphasized the importance of the Internet in the company's future plans. The company stated that development of the site is crucial to the company's future growth. It also said it has plans to make "significant investments" in its online operation and to expand its online offerings.
Among the items in the works:
- An interactive "askMartha" service that would respond to user questions with relevant audio, video, or text
- More "best of their kind" products for the site's online store
- Community features such as bulletin boards, chat rooms, and live chats with experts
"We believe that we can effectively participate in the growth of the Internet by creating a user experience that integrates information, electronic commerce, and community, all rooted in our library of high-quality content and products," the company said in the filing.
The public offering comes one day after Martha Stewart Living announced an investment from Kleiner Perkins. According to the filing, the investment from Kleiner Perkins amounts to $25 million for a 5-percent stake in Martha Stewart Living. Also, as part of its agreement with the company, Kleiner Perkins can take a 15-percent stake in any Internet venture that Martha Stewart Living might spin off, by exercising a $21 million warrant.
As Kleiner Perkins partner John Doerr stated yesterday, the venture capital firm normally doesn't invest in established companies such as Martha Stewart Living. However, Doerr said Kleiner Perkins was excited about the chance to translate the company's offline brand into an online success.
Company chief executive Martha Stewart owns 100 percent of the Class B shares of her namesake company and holds 97.6 percent of the company's voting power. Class A shareholders include Time, which owns 36.4 percent of the Class A shares; Kleiner Perkins Caufield & Byers, which owns 29 percent; and company president Sharon Patrick, who owns 32.9 percent.
The company's Class B common stock has 10 votes per share, while its Class A common stock has one vote per share. Because the public offering will involve the company's Class A shares, Stewart, 57, will maintain significant control over the company.
Stewart's salary last year was $2.98 million, with a $2 million bonus. Patrick made $493,755 with a $518,443 bonus.
According to the filing, Martha Stewart Living earned $6.6 million on $53.4 million in revenues through the first three months of this year. Last year, the company earned $23.8 million on $180 million in revenues. The company's publishing arm provided the bulk of the revenues with $127 million.
Martha Stewart Living's Internet and direct-commerce operations represent a growing portion of its business. In 1997, they accounted for $4.8 million, or 3.6 percent of the company's revenues. Last year the company's Internet and direct commerce operations brought in $14.7 million, and accounted for 8.1 percent of the company's revenue.
The company stated in the filing that its Web site has some 834,000 registered members.
Martha Stewart formed the media company in February 1997, when she acquired Martha Stewart Living magazine from Time Warner subsidiary Time Publishing Ventures, and combined it with several other media properties. Martha Stewart Living's holdings include media products such as Martha Stewart Living magazine, launched in 1991; Entertaining and other books; the askMartha radio program and newspaper column; and the Marthastewart.com Web site.
The company also offers more than 2,800 Martha Stewart-branded products.