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Fender hits wall street
- Thread starter Etienned
- Start date
I could careless about the stock options.
What I do care about is when companies start making decisions based on stock prices and not on providing a good product for their customers. Let's hope that doesn't happen but we won't know until we know.
What I do care about is when companies start making decisions based on stock prices and not on providing a good product for their customers. Let's hope that doesn't happen but we won't know until we know.
Hahaha Fender's on the market?
Prepare to watch build quality / materials / customer service plummet down the toilet.
Prepare to watch build quality / materials / customer service plummet down the toilet.
Yep. That's it, folks! Wall Street never met a healthy going concern they couldn't totally screw up.
Bummer.
Going public has only helped the owners, never the customers
RIP Fender, they have been circling the drain since Leo sold it anyway, so this will be the final FLUSH!
I don't think they've been circling the drain lately
From what I've seen, Fender's build quality has been going up. With the Squier VM and CV line and the new MP and blacktop series, I say they make a good bass at every price point. However, going public is a bad idea. I'm willing to bet the owners will realize this when they go from being owners to high paid employees. It's tough to plan and maintain a company for future strength when investors are impatient for dividends and short term results.
Just 95% of the time.
When people who don't really understand the product or the market start pushing their weight around the company because they bought stock, it tends to distort the focus of a company. If the focus is on building a quality product, expect compromises because now their focus is on investor profit.
Investors with short term profit in mind will have no remorse about leveraging 50 years of hard won reputation to sell a turd. They will have no long term concern for the company or its name, as they are not in it for the long haul.
I'm posting this almost as a bump to see what more TB members have to say about it, as anytime national economics affects our beloved hobby its an interesting discussion.
As some others stated, a move like this historically shifts managerial concern from customer satisfaction and overall company health to an environment of quick returns on investment and satisfying shareholder demands. You see company decisions made that are obviously to the benefit of said shareholders and to the detriment of customers and the longevity of the company.
People will have varying reactions; longtime Fender players who invest in the stock market may jump on board and in essence be supporting their own investment through buying their products.
Others will see this as a bad trend for music companies to make and will not buy Fender products in hopes that other companies don't jump on the bandwagon and go public as well. The funny thing is neither will affect the Fender stock price, as typically simple metrics like profit and sales don't wholly affect the stock price, there are numerous variables, predictions, metrics, and investor rumor which hold just as much influence.
From an investment standpoint I'd expect it to be a confident stock to buy, with a steady return and no huge spikes upwards or downwards. Have Fender sales been pretty consistent the last few decades (as in, have they been the consistent front runner this whole time?) For the initial few years you will probably see no change, but slowly as investors get hungry for profit margins, costs will be cut in quality, manufacturing, and materials to increase that margin, and you the customer will see that reflected in the instruments you buy. The added marketing benefit Fender receives from going public will offset the lost sales resulting from lower customer satisfaction. So in the long run, you'll end up with a lower quality product that maintains a high price due to brand recognition alone, which people have argued has already been the case for years, but that horse has been beat to death so hard in other threads I hope it doesn't come out here.
Me personally, I'd rather Wall Street activity have as little impact on my life as possible, but thats easier said than done. I just hope it doesn't become a trend. But Apple already proved that once you establish a brand deep enough in a culture, you could sell a turd in a small white case and call it an iPhone and everyone would buy it. Fender's pretty much the Apple of the music instrument world, I know theres more competitors but you can't argue they're not the leader of the pack. For this reason alone, Fender's gonna see huge profits from going public, think they made a great decision, and keep it rolling. It won't be for 5-10 years that people will look back and say "remember when Fender was just a normal company?" or maybe not, maybe nothing will change at all.
As some others stated, a move like this historically shifts managerial concern from customer satisfaction and overall company health to an environment of quick returns on investment and satisfying shareholder demands. You see company decisions made that are obviously to the benefit of said shareholders and to the detriment of customers and the longevity of the company.
People will have varying reactions; longtime Fender players who invest in the stock market may jump on board and in essence be supporting their own investment through buying their products.
Others will see this as a bad trend for music companies to make and will not buy Fender products in hopes that other companies don't jump on the bandwagon and go public as well. The funny thing is neither will affect the Fender stock price, as typically simple metrics like profit and sales don't wholly affect the stock price, there are numerous variables, predictions, metrics, and investor rumor which hold just as much influence.
From an investment standpoint I'd expect it to be a confident stock to buy, with a steady return and no huge spikes upwards or downwards. Have Fender sales been pretty consistent the last few decades (as in, have they been the consistent front runner this whole time?) For the initial few years you will probably see no change, but slowly as investors get hungry for profit margins, costs will be cut in quality, manufacturing, and materials to increase that margin, and you the customer will see that reflected in the instruments you buy. The added marketing benefit Fender receives from going public will offset the lost sales resulting from lower customer satisfaction. So in the long run, you'll end up with a lower quality product that maintains a high price due to brand recognition alone, which people have argued has already been the case for years, but that horse has been beat to death so hard in other threads I hope it doesn't come out here.
Me personally, I'd rather Wall Street activity have as little impact on my life as possible, but thats easier said than done. I just hope it doesn't become a trend. But Apple already proved that once you establish a brand deep enough in a culture, you could sell a turd in a small white case and call it an iPhone and everyone would buy it. Fender's pretty much the Apple of the music instrument world, I know theres more competitors but you can't argue they're not the leader of the pack. For this reason alone, Fender's gonna see huge profits from going public, think they made a great decision, and keep it rolling. It won't be for 5-10 years that people will look back and say "remember when Fender was just a normal company?" or maybe not, maybe nothing will change at all.
It's so rarely a good thing that I just don't have any hope. The way Wall Street ruins practically everything they touch,
I see a company that has hit its peak and is now ready to completely implode as the sharks whirl themselves into a feeding frenzy.
The only way we could be more certain of impending doom is if Fender had just announced plans to build a skyscraper.
In one sentence you summed up my every nightmarish concern about this.
Well, I am worried about this statement, as I do not exactly classify Apple as "high quality." I work in IT, and from my standpoint Apple has mostly been the Cult of Jobs. They lost track of quality concerns a very long time ago and have mostly been selling pizzazz these days.
Seeing Fender turn into a snooty, overpriced shiny junk factory would be miserable for most real players, I think. Of course, this already happened once before when Fender sold out to CBS, but this time there's no Leo Fender around to compete with his own former business.
You work in IT? So, do you get the "hey, you work in IT, can you look at my laptop and see whats wrong?" questions all the time too? Haha I sure do, and I won't even look at people's Macbooks anymore. Its a waste of my time to investigate a problem just to get to the Apple wall and have to take it to their store anyway. I can't tell you how many people I know bought a Macbook just because they got an iPod for Christmas one year... now their houses are full of Apple products BECAUSE APPLE PRODUCTS DON'T PLAY NICE WITH ANYTHING ELSE. Not to mention their products are built to last for oh, about a whole year until they start producing glitches or completely not working, so you're forced to take it to the Apple store because independent techs don't even have the ability to diagnose a problem. From a technical standpoint, if you have any concern over the future of technology, you'd say this closed box mindset is setting our culture back by decades, and yet the sheep of the world eagerly plunk down hundreds of dollars to upgrade their phone for no benefit other than a higher res but still terrible camera.
Whew, Apple rant over! What were we talking about again?
Fender: I hope Wall Street doesn't destroy the company, but the track record is very bad.
Apple: You have to love this: Your Apple product has a problem and you go to an Apple store to have it fixed. You walk in, tell the gate keeper that you need something fixed and you are told to come back in a few hours. That's customer service at it's finest (sarcastic!).
Apple: You have to love this: Your Apple product has a problem and you go to an Apple store to have it fixed. You walk in, tell the gate keeper that you need something fixed and you are told to come back in a few hours. That's customer service at it's finest (sarcastic!).
i'll be honest, i had no idea wall street was known to bring quality down- but it does make sence, that everyone has a say, even if theyre looking for a short term gain.
i'm from the "fenders arent worth the new prices" camp. i still respect fender, and use them sometimes, but for the $1100 you'd spend on a decent MIA jazz (or more?) what would the quality of most competition be? IMO much higher in almost any circumstances.
that + us expecting it to go down = ??? complete junk? not just overpriced mediocrity?
i'm from the "fenders arent worth the new prices" camp. i still respect fender, and use them sometimes, but for the $1100 you'd spend on a decent MIA jazz (or more?) what would the quality of most competition be? IMO much higher in almost any circumstances.
that + us expecting it to go down = ??? complete junk? not just overpriced mediocrity?
The other Fender news is that they've revealed that they're in quite a bit of debt... about half of the stock sold is going directly to plug part of the gap
To clear some things up...
You don't buy "stock options".
You buy stock - part ownership in the company
You buy options - a short term contract betting on the price of the stock. Usually purchased by people who can't afford the stock.
"Stock options" are issued as a form of non-cash compensation. Restrictions on the option (such as vesting and limited transferability) attempt to align the holder's interest with those of the business shareholders. If the company's stock rises, holders of options generally experience a direct financial benefit. This gives employees an incentive to behave in ways that will boost the company's stock price.
Lot of times, a company goes public because they either need an influx of cash (like Fender to reduce debt) or need the influx of cash to grow their business. People give the company money in exchange for part ownership (shares) in the business.
Also companies become too valuable they can't be sold to one person or group. It happened with WWE and Facebook is the most current example. You either want dividends (profits that are paid back) or growth
To say simply Wall Street will ruin the company is careless. Lots of companies smaller than Fender are publically traded and have been for years. If they hadn't issued stock, they'd have been out of business years ago.
You don't buy "stock options".
You buy stock - part ownership in the company
You buy options - a short term contract betting on the price of the stock. Usually purchased by people who can't afford the stock.
"Stock options" are issued as a form of non-cash compensation. Restrictions on the option (such as vesting and limited transferability) attempt to align the holder's interest with those of the business shareholders. If the company's stock rises, holders of options generally experience a direct financial benefit. This gives employees an incentive to behave in ways that will boost the company's stock price.
Lot of times, a company goes public because they either need an influx of cash (like Fender to reduce debt) or need the influx of cash to grow their business. People give the company money in exchange for part ownership (shares) in the business.
Also companies become too valuable they can't be sold to one person or group. It happened with WWE and Facebook is the most current example. You either want dividends (profits that are paid back) or growth
To say simply Wall Street will ruin the company is careless. Lots of companies smaller than Fender are publically traded and have been for years. If they hadn't issued stock, they'd have been out of business years ago.
The original question was whether we would buy stock, which is a separate issue from whether you would buy a bass from a publicly-owned Fender company. An IPO is a way to raise capital, which normally means a way for a company to expand its operations. So the question from an investment perspective is, where does Fender have to go? Is a fresh influx of cash going to enable it to reach markets it isn't reaching yet, or expand its market share in current markets, launch new product lines, or otherwise increase profitability so that the stock I buy today will be worth more next year than it is at the IPO?
I'm no Wall Street analyst, but I'm not sure the answer is "yes" to any of those questions. Fender is already a mature company - the most recognized single guitar brand out there, and has been for 40 or 50 years or more. You can't walk into a music store anywhere without already seeing Fenders hanging on the wall. Its sales and market share may go up or down from year to year, but I don't see where any big new growth is going to come from.
I'm not as panicky as some about Wall Street being all about short-term profits. Something like 70% of the money on Wall Street is from pension funds that tend to favor stable, long-term investments. Another 15% is mutual funds that are more mobile but still not constantly hopping from stock to stock (at least, that's about what the proportions were when I used to work for an investment magazine). The volatility in the market that gets so much attention is only coming from the remaining 15% of the money. That does cause pressure on management to make sure profits are good from quarter to quarter, but the bulk of investment money actually prefers to see long-term value over short-term profits.
I'm no Wall Street analyst, but I'm not sure the answer is "yes" to any of those questions. Fender is already a mature company - the most recognized single guitar brand out there, and has been for 40 or 50 years or more. You can't walk into a music store anywhere without already seeing Fenders hanging on the wall. Its sales and market share may go up or down from year to year, but I don't see where any big new growth is going to come from.
I'm not as panicky as some about Wall Street being all about short-term profits. Something like 70% of the money on Wall Street is from pension funds that tend to favor stable, long-term investments. Another 15% is mutual funds that are more mobile but still not constantly hopping from stock to stock (at least, that's about what the proportions were when I used to work for an investment magazine). The volatility in the market that gets so much attention is only coming from the remaining 15% of the money. That does cause pressure on management to make sure profits are good from quarter to quarter, but the bulk of investment money actually prefers to see long-term value over short-term profits.
Very good explanation, thanks for providing that for everyone. Though I've never heard that options are typically bought by people who can't afford the stock, I've always heard it framed as different "options" for investing and pro's and con's to both in different situations.
I don't think its careless to "predict" that a move like this will ruin a company, but its careless to not see the potential. So you have a company in tons of debt that goes public to bail itself out... the hopes being that the bailout cash will get the company back on its feet, gets out of debt, profit margins improve and everyone wins.
The other possibility, in our culture of Wall Street greed and short term profit, is that everybody buys stock at X price to bail the company out, but no internal changes are made so the company keeps hemorrhaging cash. While the popularity of the stock makes its price steadily increase, in reality the company is still losing money and still failing. So right before quarterly profits are announced, the savvy investors and stakeholders "in the know" pull all their stock and make tons of personal profit on the deal... profits are announced and the stock price plummets, and all the Fender supporters who bought stock to help the company are now sitting on worthless stock, while the board of directors and the savvy investors grabbed their cash when the gettin was good. Since the only people who actually "care" about the company more than profits is the poor musician who bought the stock which is now worthless, this now doubly hurts the consumer, since both their company and their investments have went down the toilet.
There used to be words to describe this illegal process like "insider trading" and "ponzi scheme" but thanks to lobbying and the influence of Wall Street on government, its pretty much normal operating procedure these days.
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