That's the question analysts are asking about the much delayed initial public offering of Lisle-based
Divine Interventures Inc., the firm founded last year by Andrew "Flip" Filipowski, Chicago's flashiest
high-tech entrepreneur.
The latest word from the Divine camp is that the IPO will set a price Monday and hit the market Tuesday. But
some analysts doubt it will happen then, or, perhaps, ever.
In the latest bit of bad news for Divine, the company's underwriter, Robertson Stephens, intends to drop the
price at which it will offer the company's stock from $13 to $15 a share to about $9 to $10 a share, according to sources familiar with the offering.
"There's no interest in this deal," said Ben Holmes, editor of ipoPros, a Web site dedicated to analysis of initial
public offerings. "It has been delayed and delayed. [Filipowski] needs capital. He's desperate, and
Robertson is having a tough time marketing this deal."
Filipowski is under considerable pressure to take Divine public before the end of July because commitments for
more than $200 million from private backers, including Microsoft Corp., are contingent on a successful IPO.
As analysts see it, Divine's problems are also a matter of timing. Divine is an incubator of high-tech
companies—meaning it takes stakes in Internet start-ups and tries to nurture them and accelerate their growth—at a time when such technology ventures have fallen out of favor with investors.
In any IPO, the investment bankers underwriting the stock try to obtain advance commitments to sell blocks
of it to money managers and others. But Robertson Stephens has been having trouble interesting institutional
investors in the Divine deal.
Divine's IPO has been scheduled and postponed six times now, and that, in itself, may have scared off some
big investors, analysts say. Moreover, they say, investors were spooked by Filipowski's abrupt decision
to fire his previous investment banking firm, Credit Suisse First Boston—which wanted to delay the IPO
until the climate for technology stocks improved—and hire Robertson Stephens, which was willing to try to go
forward sooner.
"It's not fun when your lead banker pulls out," said Jeff Hirschkorn, senior marketing analyst at IPO.com,
another analytical Web site. "Eventually, I think they will ice the deal altogether."
The Divine IPO has another problem as well: Statements by Divine executives may have violated the so-called
"quiet period" that the Securities and Exchange Commission requires before any IPO.
The SEC doesn't actually require silence by corporate executives; it requires that any disclosures they make
also be divulged in the company's prospectus, the document in which the company formally describes its
plans and goals to potential investors.
The problem in Divine's case, analysts say, is that the famously talkative Filipowski may have made some
claims or offered some revelations that weren't in the prospectus.
Contributing to the delay in the IPO was the fact that the SEC required Robertson Stephens to reissue the Divine
prospectus to include some of the things Filipowski had said about the company in a newspaper interview after
the first prospectus was issued.
The growing chorus of criticism of the Divine IPO is inevitable as the firm's IPO date keeps slipping, said
Charles Rutstein, an analyst with Forrester Research in Cambridge, Mass.
"Anytime you shop a product around and don't get enough buyers, then others don't have an incentive to
buy it. At some point it becomes poisoned," Rutstein said.
Also unnerving investors, said IPO.com's Hirschkorn, was a $44 million loss Divine sustained in its first
quarter. "Only 30 of their 52 holdings have any revenues at all," Hirschkorn said. "The whole incubator concept is unproven, and this deal is full of side deals that have conflicts of interest."
If Filipowski does pull off a successful IPO despite the many problems he faces, it would confirm his reputation
in the Chicago technology community as a skillful, aggressive dealmaker. But if the deal goes down in
flames, it will probably take Filipowski's reputation with it.
"It certainly is a peculiar path to the public market," said Gail Bronson, a Silicon Valley executive who is the
senior analyst for the IPO Monitor. "The whole thing is very odd. Usually you have everyone lined up early on.
To be still doing that at this point doesn't add up."
IpoPros' Holmes offers a blunter assessment. "I'll bet they're in a room right now trying to convince Filipowski
to delay until fall," he said. "A smart underwriter would shelve this deal."
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