Killing the goose that lays the golden eggs

Like many of you out there, I have been encouraged this past year to see the return of the IPO as a potential liquidity event for technology and even security companies.  Companies like Sourcefire, Aruba Networks and Blade Logic have successfully debuted.  Today's VMWare IPO was almost a throwback to the good old days, with the 29 dollar opening price topping out at $51 dollars a share at the end of the day.  However, before the good karma of this can even sink in, we see evidence of fools rushing in to kill the goose that lays the golden eggs.

I was reading on my buddy Chris Harrington's blog tonight that one of his former companies, NitroSecurity has filed for their IPO. I personally have nothing against Nitro and wish them the best of luck.  But filing for an IPO for this company just struck me as a bit crazy.  So I followed Chris's link to the Mass High Tech Journal and read the article myself.  After my first read, I was not sure if this was some sort of satire or other cruel joke.

According the article Nitro is looking to raise as much as 55 million in an IPO to be listed on NASDAQ. "Last year, the company reported a $10.4 million net loss on $2.3
million in revenue. During 2005, NitroSecurity posted a net loss of $12
million, according to the SEC filing."  Are you kidding me?  Revenue of 2.3 million, 10 million loss, coming off of a 12 million dollar loss and I can only assume less revenue?  And they want investors to pay for this.  Do they think with all of the smart money leaving the real estate and mortgage market (maybe that is where the smart money is going right now), people will buy anything in the stock market.  This just sounds hokey to me.  Especially offering one share of common stock and one warrant for each share of stock purchased.

I swear I had a deja vu back to the bubble days when companies with a business plan would IPO instead of going to VCs for money.  These types of offerings will quickly kill any momentum being built up in this market and once again close off the public markets as a potential exit for technology plays. I hope wiser heads prevail and put this potential offering back into the realm of fantasy it sounds like it belongs in, for all of our sakes.