IPO Lessons Learned From Ashley Madison

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IPOAvid Life Media, the Canadian company behind recently-hacked infidelity website Ashley Madison, told Bloomberg back in April that it was prepping an initial public offering that would value that company at upwards of $1 billion. The statement was dutifully picked up by the business press (including by us at Fortune), particularly since it included a wise-sounding caveat about pricing in London because Europeans were less squeamish about such things than Americans.

But it seems those IPO plans were a lot like those ?millions? of female Ashley Madison members ? not legitimate, but rather a giant self-actualization exercise. If you build it, they will come.

According to Reuters, some of the hacked documents suggest that Avid Life?s IPO plans were revealed at the same time that ?investors had pressed [the company] to improve liquidity so they could sell shares.? It also reveals that the company had repeatedly sought, and failed, to find a buyer or third-party debt.

None of this is the sort of high-flyer image that Avid Life had sought to present back in April. If it couldn?t even raise debt ? including, presumably, from lenders outside of North America ? why would it have any confidence that it could raise $200 million in equity at a $1 billion valuation, or even find IPO underwriters? And if the company knew that a potential buyer was turned off by (recently resigned) CEO Noel Biderman?s ?difficult and very demanding? personality, did it not think that similar issues might arise on a road show?

Or was the entire IPO plan a calculated bluff, leveraging the recent public interest in $1 billion-valued tech startups? Tell everyone that public equity investors are willing to invest $200 million at a huge valuation, and maybe it shakes loose a new buyer who thinks it?s getting a bargain?

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