WMI plan to go public and issue shares via an IPO
A few weeks ago I received an email from someone claiming to be an insider over at Wealth Masters International. Amongst other things, the email claimed that
Wealth Masters is going broke they can barley pay their bills. Behind on many invoices and vendors are threatening collection.
Maybe they are not so “wealthy”.
Every so often I get these types of emails from anonymous sources and like this one, if they don’t contain any additional information to back up their claims, I rarely report on them.
After all, anyone can submit anything. Without official clarification, how am I to know what is and isn’t mere speculation.
Fast forward a few weeks however and just yesterday Wealth Masters announced plans to make an initial public offering (IPO) and float the company on the stock market.
For those of you unfamiliar with the term, an IPO is
when a company (called the issuer) issues common stock or shares to the public for the first time.
They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately owned companies looking to become publicly traded.
Of course that’s all very well, but why have WMI founders Kip Herriage and Karl Bessey decided to publicly trade the company?
More importantly, what does it mean for you as a distributor, your business and your potential leads?
Reading the press release put out by Herriage and Bessey regarding the IPO reads like a long winded explanation, without actually explaining anything.
The press release opens with what appears to be an acknowledgement that an injection of funds are needed to keep WMI going in its current state;
As many know, we started WMI with just 10 Members and with lots of people telling us that what we had in mind would not work.
We refused to take on bank debt or buy production. Instead, we remained committed to building WMI debt free and through organic growth only while following our business plan each step of the way…decisions we have not waivered from.
We would not accept income from the conflicts of interest that most competitors accept without blinking an eye at, and incredibly, derive the majority of their income from.
Herriage and Bessey also rule out that they’re plans to float a IPO are nothing more than a blatant money grab;
We would never do anything simply because there was money to be made by doing it, and we would never violate our commitment to integrity.
Put within the context of the email sent to me a few weeks ago (which I still mind you take with a grain of salt), all of this sounds like Herriage and Bessey for whatever reason need an injection of funds and that they’re not too happy about it, but that they also refuse to compromise their position to run WMI as a debt free company.
As to why the injection of funds is needed, who knows. Maybe the business model is failing (despite Herriage and Bessey claiming that WMI ‘is the only $100 million plus, direct selling/network marketing Seminar Company still in business today‘), the economy isn’t quite playing out how they planned, a series of bad investments or maybe existing members are having a hard time finding new recruits.
What I do know is that Wealth Masters’ last two ventures both seem to have failed to create any momentum with the company or its memberbase. Back in November last year WMI announced plans to offer a nutrition and finance subdivisions that their members could market.
The finance division, Opes Partners, launched in the first quarter of 2011 but has now all but seemingly faded into oblivion.
The nutrition division, WMI Pure, appeared to be on track for a delayed September 2011 launch but following the sudden departure of Pure CEO Deanna Latson in July, no formal announcement has been made as to what is happening with PURE.
With September just eight days away, it’s almost as if WMI are pretending that the company PURE never existed and hoping nobody will notice.
In addition to these two seemingly failed ventures, in April this year WMI also managed to attract what they called ‘top producers‘ to the company. Given the co-incidental timing of these marketers all abandoning their current projects and companies to come and work for Wealth Masters, there’s almost no doubt that there had to have been some money in play there.
As a result of these high profile marketers joining WMI, nothing much seems to have materialised. Ryan Nelson, who the company claims is a SEO expert, created the website Wealth Journals but other than that there’s not really much else to show.
Combine all of this, and there’s a very real possibility that perhaps this year WMI has made some rather poor (and potentially costly) business decisions.
Enter the IPO.
The main benefits to Herriage and Bessey by offering WMI as a publicly traded company are
- enabling cheaper access to capital
- exposure, prestige and public image
- attracting and retaining better management and employees through liquid equity participation
- creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc.
All of which you can see relate in one way or another to financing of the company. Having attracted so many ‘chiefs’ to the company this year, perhaps a stock option will help to not only to keep the current enrollees but also attract new blood to the company.
Either way, it’s clear to see that the main advantage of offering an IPO are all financial.
Meanwhile on the disadvantage side of an IPO you’ve got;
- significant legal, accounting and marketing costs
- ongoing requirement to disclose financial and business information
- meaningful time, effort and attention required of senior management
- risk that required funding will not be raised
- public dissemination of information which may be useful to competitors, suppliers and customers
The standout disadvantages, in relation to a MLM company, are obviously the increased accountability of management as well as the required release of information which otherwise would have been held private for competitive (although WMI claim they have no competitors) reasons.
Accountability to share holders will be interesting. If we look back on the past 12 month’s failures within the company, if you imagine the same series of events taking place if WMI was being publicly traded at the time, it’s hard to imagine management pulling through unscathed.
Looking forward, with no announced real strategy beyond some ‘major corporate initiatives‘, there doesn’t seem to be much of a road map beyond the IPO at this stage itself.
Finally with a stock price we can peg the success of the company on, as well as annual reports and increased transparency, a lot of the inner workings of WMI will be open for everyone to see.
I personally welcome the transparency but I imagine it’ll be somewhat of a gear shift for WMI management themselves. Herriage and Bessey have enjoyed accountability only to themselves since launching WMI in 2005, so I imagine the added responsibility and accountability will definitely take some time to get used to.
As a member of WMI or someone looking to join the company, either way I’d be watching this space very carefully.