Another chapter in rock‘n’roll history was almost closed when the Fender guitar company announced its plans to go public. If the legendary company were to be traded, it would mean that one of the last icons of musical independence would be gone, forever shaped by economy and capitalism rather than ingenuity and imagination. While few can doubt the brand’s legacy and its contribution to popular culture, there’s really no way to continue to be a legend and be publicly traded at the same time. In the end, Fender retained its sovereignty and the IPO didn’t pan out, but the company’s debt still looms on the horizon.

On June 18, 1965, legendary rock guitarist Jimi Hendrix blasted his way onto the US rock scene by famously ‘sacrificing’ his Fiesta Red Fender Stratocaster to the rock ‘n’ roll gods. The charismatic genius of the six string dowsed his pride and joy with lighter fluid then burned it on stage at the Monterey rock festival. Fellow psychedelic rocker Pete Townsend of The Who also had a penchant for destroying Fender guitars and his band’s exhilarating live performances gained them global recognition. Far from tarnishing the firm’s reputation, the exploits of these hell-raising upstarts helped cement the Fender name for generations of rock music fans. A while back those fans had almost had the chance to buy into rock history by purchasing the company’s shares.

The Fender name, from its inception in 1946, has always been at the forefront of musical instrument brands. Along with the Stratocaster guitar, it also produces the Telecaster, Jaguar and Jazzmaster bass. In addition to this, the firm owns many other subsidiaries, such as Squire, Jackson, Guild, Ovation and Latin Percussion, and the announcement that the firm intended to sell a percentage of its business on the stock exchange had gotten many tongues wagging.

Up to the Neck in Debt

The news of the flotation didn’t strike a chord with investors, though. Musical trends like rap and house have left guitar music in a precarious position, and computer technology has also given aspiring musicians alternative ways to create their work. Although still the strongest brand in the electric guitar industry, Fender’s market share has dwindled, and the company is in debt to the tune of USD 246 mln. With a potential value of around USD 395 mln, Fender hoped to wipe USD 200 mln off its debt by tendering 10.7 million shares on the NASDAQ. Unfortunately, according to many experts, including Jeffrey Bronchick, CIO at the investment company Cove Street Capital, the stock’s initial price was set much higher than the then market conditions would allow. The flotation didn’t happen, but it might be for the better. Stock marketed companies can always fail, as was amply demonstrated a while ago by Facebook, and Fender’s future – while certainly not as bright as in the 1960’s – may look less bleak.

Facebook’s IPO price was ramped up, leaving investors and market makers in a purple haze. The Fender launch certainly wouldn’t have created anywhere near the frenzy experienced by that IPO, which was heightened by chancers looking to make a killing in the first few hours, but it might have put some NASDAQ investors off risking their collateral. Another sticking point was the forecasted initial Fender share price, which was believed to be set at around USD 14, which would be quite a lot for such a debt-ridden company.

Don’t Fret

Nick Einhorn, a research analyst at Renaissance Capital, said: “It’s not a company that represents an exciting growth industry… An investor would be coming at it from more of a value perspective.” Attracting the kind of investor who prefers to sit tight on shares instead of drawing in fly-by-night investors should mean the stock holds its value for longer, and that might be what Fender was counting on. Hypothetically speaking, it’s a good example of how to build a solid stock presence without actually providing an „exciting” product, and it’s a shame Fender didn’t actually get to try the strategy out on the market.

Fender’s international reputation for quality products is evident in that it sees 47 percent of its sales from outside the US. In 2010, the global market for musical instruments was worth USD 15.8 bln and it hopes to gain more of this over the coming years by breaking into emerging markets like China and India. Despite the pulled IPO and the mounting debt, Fender’s still going strong; it’s introduced several new products since the July fiasco and plans on widening its horizons even further.

Fender History

Entrepreneur and qualified electronics technician Leo Fender sets up his own business, Fender’s Radio Service, in 1938. The business operates out of Fullerton California and specializes in repairing audio equipment of the day, like radios and record players. Increasingly, he is asked to repair musical instruments, amplifiers and public address systems. This ignites his interest in the possibilities of electronic music.

Fender Radio Service continues to operate, but Leo Fender decides to set up The Fender company in 1946. With a handful of workers the firm begins selling electric guitars through retail outlets.

The company introduces the Telecaster guitar in 1951 which is shortly followed by the classic Stratocaster in 1954. The ‘Strat’ shape is modeled on the figure of a woman and soon becomes the guitar of choice for legends like Eric Clapton and Jimi Hendrix. The Fender Jaguar follows in 1962, which much later inspires grunge heroes like Kurt Cobain of Nirvana and Jay Mascis of Dinosaur Jr. to define the sound for the ‘slacker’ generation.

In early 1965, Leo Fender sells his companies to the Columbia Broadcasting System (CBS). He does so for USD 13 mln.

1985 witnesses the Fender Electric Instrument Manufacturing Company being purchased by employees of the company from CBS. They rename it the Fender Musical Instruments Corporation.

 

VOCABULARY

chapter – rozdział
to go public – o firmie: wejść na giełdę
to doubt – wątpić
brand – marka
legacy – spuścizna
contribution to sth – przyczynek do czegoś, wkład w coś
to blast one’s way somewhere – zdobyć coś przebojem
famously- pamiętnie
to sacrifice – poświęcić
to dowse/douse sth with sth – polać/oblać coś czymś
lighter fluid – benzyna/nafta z zapalniczki
on stage – na scenie
fellow – kolega po fachu
to have a penchant for doing sth mieć skłonność/zamiłowanie do robienia czegoś
to destroy niszczyć
exhilarating – porywający
live performance – wystep na żywo
to gain – zyskać
recognition – uznanie
to tarnish sb’s reputation – zszargać czyjąś reputację
exploits – wyczyny
hell-raising – awanturniczy, bardzo hałaśliwy/chaotyczny
upstart – karierowicz, nowobogacki
to cement sth – przypieczętować coś
generation – pokolenie
to buy into sth – wkupić się w coś, zostać udziałowcem czegoś
to purchase – nabyć
share – udział
inception – powstanie, rozpoczęcie
to be at the forefront of sth – przodować w czymś, stać na przedzie/czele czegoś
bass – gitara basowa
subsidiary – jednostka zależna, firma zależna
announcement – ogłoszenie, obwieszczenie, komunikat
business – tu: walory/majątek spółki
stock exchange – giełda papierów wartościowych
to have/get tongues wagging – wywołac poruszenie
(to be) up to the neck in sth – (być/tkwić) w czymś po uszy
debt – dług, zadłużenie
flotation – emisja akcji spółki (na giełdzie)
to strike a c(h)ord with sb – trafić komuś do serca, tu: wzbudzić czyjąś sympatię
precarious – niebezpieczny, niepewny
aspiring – ambitny, dążący do sukcesu
to dwindle – skurczyć się, zmaleć
to the tune – w okolicy, w przybliżeniu
value – wartość
to wipe sth off (a debt) – anulować (część długu), spisać (dług)
to tender – stanąć do przetargu, tu: zacząć handel czymś
IPO (initial public offering) – pierwsza oferta publiczna (akcji spółki na giełdzie)
to ramp sth up – tu: sztucznie coś podbić, wyśrubować (np. cenę)
market makers – uczestnicy rynku, najwięksi gracze
purple haze – tu: konsternacja, oszołomienie (od nazwy piosenki Jimi Hendrixa i nazwy narkotyku)
frenzy – szał, szaleństwo
to heighten – podwyższyć
chancer – cwaniak, tu: oportunista
to make a killing – łatwo i szybko zarobić krocie
collateral – zabezpieczenie finansowe
sticking point – kwestia sporna
forecasted – prognozowany
initial – pierwotny, wstępny
to fret – przejmować się
research – badanie, badania
exciting – ekscytujący
growth industry – branża przemysłu, która przeżywa boom lub przynosi duże zyski
to come at sth from a perspective – podchodzić do czegoś z jakiegoś punktu widzenia
to attract – przyciągać
to sit tight – nie ruszać/rzucać się, być spokojnym lub ostrożnym
to draw sb in – przyciągać kogoś, zwabiać kogoś
fly-by-night – kombinatorski, podejrzany
stock – akcje, kapitał akcyjny
to count on sth – liczyć na coś
evident – wyraźny, widoczny
to gain – zyskać
to break into sth – wejść gdzieś przebojem, zdobyć coś szturmem
emerging market – rynek rozwijający się
entrepreneur – przedsiębiorca
qualified – wykwalifikowany, dyplomowany
technician – technik
to set up – założyć
to operate out of somewhere – prowadzić gdzieś działalność
equipment – sprzęt
of the day – tamtych/owych czasów
record player – gramofon, adapter
increasingly – coraz bardziej, coraz częściej
amplifier – wzmacniacz
public address system – system nagłośnienia publicznego, nagłośnienie
to ignite – rozpalić, rozbudzić
handful – garść
retail outlet – punkt sprzedaży detalicznej, sklep
to introduce – wprowadzić, zaprezentować
followed by… – po którym następuje/pojawia się…
X of choice – najlepszy z X
slacker – obibok
broadcasting – nadawanie (TV, radio)
to witness sth – być świadkiem czegoś, doświadczyć czegoś
to rename – zmienić nazwę

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