Gibson Guitars

The Fender IPO Could Add Cool to Your Portfolio

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You might not be able to play guitar like Eric Clapton, but you can soon add some rock ‘n’ roll cool to your portfolio. On Friday, guitar maker Fender Musical Instrument filed for an initial public offering, seeking to raise $200 million, about half of which will be used to pay down the company’s $246 million debt. The stock will be listed under the symbol FNDR on Nasdaq.

Analysts would ordinarily be skeptical of a company that’s going public to help balance its books. Investors prefer companies with clear plans to expand; they don’t usually want to help pay for acquisitions and debts already undertaken. But Fender has something going for it that very few others possess: It’s an iconic brand people truly love. The company has been around since 1946 and has a solid reputation for making first-rate guitars such as its Telecaster and Stratocaster models. Eric Clapton, Jimi Hendrix, Pete Townsend, and John Mayer either are—or have been—loyal customers.

“It’s up there with ,” says Tom Taulli at InvestorPlace’s IPO Playbook , “as a company that people love so much they’re willing to tattoo the logo on themselves.” That tattoo cachet, as it were, could lure additional investors when the stock starts trading in a few months. Fender has long dominated the industry—with $700 million in revenue last year, it was the No. 1 seller of acoustic, electric, and bass guitars in the U.S.—and it’s expected to remain on top. Its closest rival, Nashville-based Gibson Guitars, had $500 million in sales. Gibson, a privately held company, has no reported plans to go public.

Source: BusinessWeek