1. How sound was G-III’s business? Was it suitable for an IPO?
G-III’s business was based on consumer consumption of leather goods. While leather was a hot fashion item, and growth rate projections were expected to grow at about 3.5% in 1989-1990, the general economic conditions during this time period had increased such that people had more disposable income to spend on apparel. This brings up an interesting point-G-III’s business was based on the fickle tastes of consumers, which were tied closely to the state of the economy. G-III was generally predicted to capture about 10% of the 1989 industry sales, up from only 2% in 1985, in an industry that grew at a 15% annual rate. However, the company’s net sales had grown at a compound rate of 68% from 1986-1989. It should be noted that there were no other leather companies that had IPOs at this time. Finally, in any case, minimum earnings growth potential should be 20% per year, if a company is considering an IPO. Current financial statements can argue that G-III was certainly moving in this direction, but it is unclear if it can continue on this path, or if an economic boom was the cause of this.
Having noted these factors, there were several clear risk factors for G-III, including the dependence on key customers and key personnel, and seasonality risks. Therefore, it seems that G-III was not best positioned for an IPO. However, it seems that because of the nature of its business, it wouldn’t ever be possibly better positioned. Therefore, if G-III were to ever seek out an IPO, now is the time.
2.Who was Oppenhiemer? What was the role of Oppenheimer in the process? Was Oppenheimer’s role commensurate with its fees? Oppenheimer was the group that was to handle the IPO, via Richard White, they were a well ranked underwriting group; they were to serve as the non-lead underwriter. Oppenheimer conducted road shows to increase investor awareness of G-III. Oppenhiemer had agreed to...