John Paczkowski

Recent Posts by John Paczkowski

An OpenTable IPO? Yeah, Good Luck With That…

The market for initial public offerings has been all but boarded up by the financial crisis. The unemployment rate in the restaurant business is nearing 10 percent after what Cowen & Co. restaurant analyst Paul Westra describes as “one of the most brutal years in history for the restaurant industry.” And fine-dining sales are forecast to fall 12 percent to 15 percent in 2009.

But restaurant reservation service OpenTable is filing to go public anyway.

The San Francisco company, headed by former eBay (EBAY) and PayPal executive Jeff Jordan, filed for a $40 million initial public offering Friday, daring to do what few others have done in recent months. Open Table is only the third venture nationwide to register for an IPO this year. If it does manage to go public–and filing for an offering is no guarantee–it will be among the few companies that have managed to do so in quite a while. According to The National Venture Capital Association, there were just six IPO exits in 2008, the fewest annual venture-backed offerings since 1977.

What makes Open Table think it can pull off a successful IPO amid such an unwelcoming market? Tough to say, especially given the vast “Risk Factors” portion of its S-1 filing with the SEC, which was daunting enough without the six-paragraph caveat concerning the challenges of operating a restaurant reservation system during a recession.

Our performance is subject to worldwide economic conditions and their impact on levels of consumer spending, which have recently deteriorated significantly and may remain depressed, or be subject to further deterioration, for the foreseeable future….Consumer purchases of discretionary items generally decline during recessionary periods and other periods where disposable income is adversely affected. Because spending for restaurant dining is generally considered to be a discretionary purchase, declines in consumer spending may have a more negative effect on our business than on other companies in general. In particular, a significant majority of our restaurant customers are fine-dining restaurants which have been particularly affected by economic downturns such as the one we are currently experiencing. We believe that the total number of reservations, including reservations by phone, seated by our restaurant customers has decreased approximately 10% to 15% for the fourth quarter of 2008 from the same period in 2007.

Not the sort of language that makes you want to cash out the college fund and queue up to buy some IPO shares is it?

So again, what makes Open Table think it can pull off a successful offering amid such an unwelcoming market?


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