Skullcandy Up on the Auction Block
This pisses me right off.
Yes, I understand that Skullcandy doesn't hold much interest for headphone enthusiasts...and Skullcandy probably doesn't care. Well, they did for a little while...when they introduced the Mix Master I was told they were trying to move upscale and beat Beats at their own game. That didn't end wellproblems with cracking headbands queered the introductionso they backed away and focussed on the 15-28yo demographic and knuckled down to make inexpensive headphones.
I think they got it rightproduct-wize, anywaytheir Aviators, Grind, and even the weird Crusher with built in sub-woofer were pretty cool. Not for us, but for the kids. I really think, given their target audience, they do a terrific job building product with a solid value proposition. Moreover, ask any 22 year old, they know the name Skullcandy. Pulling that off is not easy.
The problem, it seems to me, is when they had their IPO in 2011, the purchase price was inflated by guys in suits who thought headphones were on the verge of going through the roof. Someone was going to make a bajillion dollars...Skullcandy might be just the one. They had a winning strategy: focus hard on the urban youth, particularly the action sports kids, reach out strongly with grass roots efforts (like sponsoring skateboarders and contests), and become actually coolinstead of fake cool like those other celebrity bling cans. They made headway...serious headway...they moved some iron.
Going public in the midst of all that with an inflated investor expectation is dangerous stuff, however. Sennheiser gets to do its thing as a private company. One year may be better or worse than the next, but it remains "focus, focus, focus" for them. They're in it for the long haul and their market position is hard and well earned. They're strong...and they got that way because they were answering to their own vision and missionnot answering to investors who want their quarterly bump.
On the other hand, once investors paid $20/share and subsequently began to feel like Skullcandy wasn't going to live up to the (unrealistic) expectations, confidence floundered...and the stock did too. Retail, boots-on-the-ground, campaigns aren't cheap. I've got to think a lot of that stuff got the budget axe trying to recoup the losses. Once that happens, the plot gets lost in the shuffle for profit. Hell meet handbasket.
If they hadn't gone public, I think they would have been way better off.
Evidently, Rick Alden, Skullcandy's founder and Executive Director may feel the same way. Last month he announced the intention to take the company private, triggering offers first from mobile device case maker Incipio for $177M ($5.75/share), and then from buyout firm Mill Road Capital at $6.05/share.
Incipio? Really? A cell-phone case maker? Sure, they may have a good distribution system, but I bet they don't have point of purchase displays in skateboard/snowboard shops. I'd hate to see the Skullcandy brand stamped blithely on cheap plastic crap.
Mill Road? Who knows? Maybe they'll see the value of the brand and how they built it on real relationships and solid product. Some analysts think Skullcandy is a pretty good buy right now. At that price maybe Mill Road will give them a little leash to get back on their mission.
At any rate, it saddens and angers me that Skullcandy's been beaten up by the market even though they've done such a dandy job of making headphones for the sk8ers. I wish them luck.
So note: If you ever take a company public, don't try to get too much for the stock. Every dollar comes with the expectation of serious return. If the investors don't get that right quick, they get all pissy and that's all it takes to deflate your company.
On second thought: If you're ever thinking of taking a company public, maybe the best starting position is "Don't!"