A look back at Microsoft’s IPO

Speaking of good fortune, Fortune magazine was granted inside access to Gates, his executive and legal teams, and their Wall Street partners in the months leading up to the IPO. That arrangement resulted in a terrific fly-on-the-wall story published four months later.

A few highlights gleaned from that story and other online resources:

Gates was not at all anxious to go public, but Microsoft was bumping up against federal regulations governing the number of private stockholders a company can have before being required to register with the SEC (see Facebook, 2011).

A quote from Gates:

”The whole (IPO) process looked like a pain, and an ongoing pain once you’re public. People get confused because the stock price doesn’t reflect your financial performance. And to have a stock trader call up the chief executive and ask him questions is uneconomic — the ball bearings shouldn’t be asking the driver about the grease.”

Crafting the prospectus was a labor of dental surgery, as the driving goal became guarding against future litigation that might be fueled by even the slightest hint that Microsoft was hyping its future prospects. Look which current CEO pops up as the voice of doom and gloom in a description of one meeting with the Wall Streeters:

For ten hours Gates, (Microsoft president and COO Jon) Shirley, and other managers exhaustively described their parts of the business and fielded questions. Surprisingly, the Microsoft crew tended to be more conservative and pessimistic than the interrogators. Steven A. Ballmer, 30, a vice president sometimes described as Gates’s alter ego, came up with so many scenarios for Microsoft’s demise that one banker cracked: ”I’d hate to hear you on a bad day.”

If you’d like to read what they finally came up with, you can read the prospectus here (.pdf).