Salesforce.com's Public Offering Stalled

Scheduled for an initial public offering (IPO) the week of May 24 that could have valued Salesforce.com at more than $850 million, it is now widely reported that the Securities and Exchange Commission (SEC) has stopped the clock. The agency has allegedly expressed concerns about a May 9 article in The New York Times in which company Chairman and CEO Marc Benioff discussed the CRM competitive landscape, an apparent violation of "quiet period" regulations governing the public stock sales process. Adding to the confusion, the Times also reported on what appears to be a personal stock sale by Benioff that was not disclosed in IPO materials. Salesforce.com is officially providing no comment on any reports, citing the same quiet period regulations that may have been violated--a lesson that might have been learned a little too late. "It's sad that it happened, but especially in this day and age--when they mean 'quiet', they really mean 'quiet,'" says Sheryl Kingstone, CRM program manager at The Yankee Group. Bold statements later regretted are not new to Salesforce.com, which last summer had to backtrack from a fundraising event that implied support for the company from the Dalai Lama. "Can you criticize Marc for being overly zealous about where his company should be and how it's going to affect the future? Yes, but that's the role of the CEO, to lead the market," Kingstone says. "It's a lesson learned for new CEOs." Neither Salesforce.com nor the SEC is publicly commenting on the situation, but IPOfinancial.com says that Morgan Stanley, the firm handling the stock launch, has removed a previously published date range for the Salesforce.com IPO. "It's conceivable that it could be pushed back a week or two, but the date is always tentative," says David Menlow, president of IPOfinancial.com. Menlow says that the issue at stake is unprecedented in his experience. "[Benioff] is 39 years old, he's chairman and CEO of a company, and has done quite well for himself, but I am still amazed that he allowed a New York Times reporter to follow him around and watch what he did during the course of one business day," he says. "I've just not heard of anything like this in the fifteen years we've had this company. It defies any form of common sense as it relates to maintaining rules during the quiet period." Despite the travails Menlow remains confident that Salesforce.com will ultimately make a successful splash. "In 2001 they burned up 5.8 times more than they made in revenues...in fiscal 2004, they turned a net profit," he says. "We expect that this story is what the Internet stocks of the 1990s were trying to accomplish."