Excerpt from Barron's Weekly Magazine. Receive all our excerpts by signing up here):
The Inner Workings of InnerWorkings by Bill Alpert
Summary: Morgan Stanley's hyping a $150 million follow-on stock offering next week for InnerWorkings, a company whose proprietary software will supposedly revolutionize the printing industry. Since the initial August IPO, INWK has shot up 80% to a recent $16.20. With just $5.7 million in profits this year, the company's $700 million market cap gives it a whopping 125 P/E—enormous for a techno-glorified printer broker who splits the savings bullied out of printing companies with client companies. The company has tried to obscure ownership by Eric P. Lefkofsky, whose checkered past has burnt investors many times. Ex-employees say INWKs 'PPM4' software doesn't work, and that Lefkofsky and his cronies will be cashing out 6.2 million share options next week, even before the initial IPO's Feb. 11 lockup date. Lefkofsky's previous ventures, Starbelly.com and a sports apparel branding venture with promotional item vendor Ha-Lo, both ended belly up and in court. Lefkofsky's vulgar style and fraudulent practices of inflating numbers to bilk shareholders should give pause to investors.
Related Links: Jim Cramer's Take On INWK, Dec. 22; Recent Software IPOs Have Actually Done Pretty Well; This Week's IPOs: GNC, InnerWorkings, Marathon Acquisitions
INWK 5 month chart: