For some Triangle companies, going public can be a double-edged sword

dranii@newsobserver.comNovember 30, 2013 

The CEO of e-commerce technology company ChannelAdvisor is still getting used to running a publicly traded company.

“Transparency is good, but it can also be uncomfortable,” said Scot Wingo, whose Morrisville-based company went public in May.

The primary reasons for going public are to raise a big chunk of capital and to provide liquidity for the company’s owners. But there are a number of ancillary pros and cons.

On the plus side, said Wingo, customers and potential customers can see for themselves how well ChannelAdvisor is faring. And since the answer is that it’s doing very well – its earnings have exceeded expectations and its stock price has risen 145 percent since it went public – that’s been a boon.

“It has helped us with customers,” Wingo said. “We’re an open book. You can look at our financials. We’re on track to do over $60 million (in revenue) this year, etc. ... If you check us against the competition, they’re much smaller than we are.”

“Before (the IPO), you would have asked me how many customers does ChannelAdvisor have and I would have been vague,” Wingo added. “Now I (will) tell you specifically: 2,287.”

It’s also been a morale-booster internally, given that all of the company’s employees have stock options.

Before the IPO, those stock options seemed almost like “a lottery ticket,” said Wingo, but today their value is quite tangible.

A fine line

On the minus side, Wingo said, competitors now know much more about ChannelAdvisor’s business than ever before.

“We’re in a competitive area,” Wingo said. “It feels like, in a way, you are providing intelligence to your competitors.”

So ChannelAdvisor is trying to walk a fine line.

“We have worked with the SEC to make sure we are meeting the letter of the law, but not disclosing too much,” he said.

It was a repeat performance of sorts when Quintiles, the world’s largest pharmaceutical services company, went public in April.

Durham-based Quintiles was publicly traded from 1994 until 2003, when founder and then-CEO Dennis Gillings engineered a $1.7 billion leveraged buyout.

Even after going private, however, the company continued to operate as if it was a public company in many respects, said spokesman Phil Bridges. That included tracking its quarterly results as if it was publicly traded, although it refrained from disclosing those results to the public.

Consequently, said Bridges, becoming publicly traded once again “was a very easy transition.”

Helps recruiting efforts

Likewise, Kenneth Moch, the CEO of Chimerix, a Durham drug-development company that went public in April, has traveled this path before. He previously was CEO of Alteon, a publicly traded drug company based in New Jersey.

Still, “there is nothing old hat about running a public company,” Moch said. “Experiences are always different, and the challenges always evolve.”

Moch believes that the San Francisco and Boston metropolitan areas have a distinct advantage over the Triangle when it comes to recruiting new employees for biotechnology companies, because those regions have much larger biotech clusters than the Triangle.

But becoming publicly traded has given the company’s recruiting efforts a major boost.

“It gives external validation to the worth of the company,” Moch said.

Although publicly traded companies disclose drastically more information than private ones, the paradox is that Securities and Exchange Commission regulations prohibit “selective disclosure” – that is, revealing significant information to a single investor or a group of investors instead of disclosing it to all investors in one fell swoop.

Consequently, Chimerix has held training sessions for its more than 50 employees so that they stay on the right side of the regulations.

“You can’t talk to your friends the same way” about the company, Moch said. “You can’t talk to your relatives the same way. You have to be very controlled in what you say to them.”

Ranii: 919-829-4877

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