Latest SEC filing
http://www.sec.gov/Archives/edgar/data/1423542/000119312511182882/ds1a.htm
Looking at their balance sheet it looks like they loaded up on some debt and the current shareholders took out some serious money. I didnt read the whole thing so maybe they financed some new manufacturing equip with that debt, I dont know. I dont see this trading at $19 for long. They have already amended the IPO a few times also.
Wall Street Journal Article:
http://online.wsj.com/article/SB10001424052748704254304576116491405749626.html
Skullcandy IPO? Check Your Head
If anyone needs proof the tech sector has entered extra-frothy, double-latte territory, it's best to look past the immense valuations discussed for Groupon or Facebook.
Look instead on the market's margins, where a new set of tech companies is racing to attract public investors before the warm, buzzy feeling wears off.
That's where a curious document was released Friday afternoon: The initial-public-offering papers for a company called Skullcandy, Inc., issued by top-tier underwriters at Bank of America-Merrill Lynch and Morgan Stanley.
Skullcandy, the company that makes large colorful headphones stamped with skulls, recently filed for an IPO. WSJ's Dennis Berman explains to Evan Newmark why it's the strongest proof yet that the tech sector has entered extra-frothy, double-latte territory
.You probably try to avoid things called Skullcandy. Your kids think otherwise. Lately, they may have been pestering you for a pair of Skullcandy headphones for their iPhones. These headphones are typically stamped with bright colors and large skulls, presumably to enhance parental annoyance.
As the prospectus makes clear, the company's business is keyed to marketing, which entails dozens of endorsements from rapper Snoop Dogg, snowboarders and NBA players. It's all meant to embody a "lifestyle" in line with the company's motto that "every revolution needs a soundtrack."
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Skullcandy
NUTHIN' BUT A "V" THANG? Valuation questions are dogging headphone firm Skullcandy, endorsed by Snoop.
.Skullcandy has moved from a Park City, Utah, startup to become the second-largest headphone maker in the U.S. Its timing is impeccable. The rise of the devices—be they iPods or Android phones—means teenagers are plugged in more than ever. Skullcandy sales grew last year by 36%, and sales look to top $140 million for all of 2010. That's more than three times the sales of Koss Corp., a struggling rival.
Revolution—and money—is in the air. And that makes for dangerous times for public investors, who are being bombarded with what seem like cartoonishly large valuations for Apple Inc., Groupon and even closely held Zynga Game Network Inc. All the talk is pushing price expectations higher for companies with even the slightest hook into an iPod or a Facebook app.
Just a few weeks ago, shares in a penny stock named Snap Interactive soared nearly tenfold, as word that its Facebook dating app, AreYouInterested, was attracting tens of thousands of users a day. Its last reported quarterly revenues were $1.7 million. It is now worth more than $60 million on the pink sheets.
Similarly, CrowdGather Inc., which listed shares in 2008, has less than $1 million in revenue in the past 12 months. Still, the company, which hosts online message-board forums, is valued at $70 million. Demand Media Inc., which develops huge volumes of Internet content and went public last week, was listed at $17 a share and promptly jumped to $23 before settling on a still-heady $20.23. The Nasdaq Composite index is chasing precrisis highs. The tech-heavy index closed at 2700.08 Monday, leaving it 5.6% below its 2007 peak of 2859.12.
There are, of course, billions of dollars in value being created in these new sectors of the technology economy. But over time there is a relentless grind to the bottom, recalls Bruce Greenwald, an investor and renowned leader of Columbia University's value-investing center. Nowhere is that more so than in consumer electronics, he says. Mr. Greenwald even has dire predictions for the mighty Apple, predicting the industry's economics "are hopeless in the long run" and that eventually Apple will become only a "marginally profitable" company.
Indeed, the premium for skulls isn't what it used to be. Skullcandy's operating margins have deteriorated since 2007, falling from 27.8% to 19.9% in its September quarter. Once a novel show of status, Skullcandy must now spend more in sales and marketing to generate each new dollar of revenue. Older companies know this all too well: The operating margins at Koss, for instance, are more than 15%, while at Sony they barely scrape 9%.
Skullcandy declined to comment. Its prospectus warns that more competition is on its way: Both Adidas and Nike are entering the space.
That can't stop a young company from dreaming big. Skullcandy said it hoped to sell as much as $125 million in stock in its IPO. Should it issue a typical 20% to the public, it would sport a total valuation of $625 million. That would value the company at roughly four times sales, the same value as Apple, whose margins and outlook are superior.
Skullcandy has built an impressive company from scratch. That still doesn't mean it should go public or that investors should buy its shares. The soundtrack to its investing revolution could be an old anthem by rap group Public Enemy, who reminded headphone-decked listeners: "Don't Believe the Hype."
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