The Cleveland Indians have been winning on the field this season, but it will likely be up to the baseball team's notoriously loyal fans whether its stock offering next week will be a hit.
To be sure, analysts expect good demand for the issue -- the first by a major-league baseball team -- because of its novelty value and the support of its fans.
"This is something you buy and hang on the wall, or give to your grandson," said one investment fund manager, an avid Indians fan.
Next week, the Cleveland Indians Baseball Co. will offer up to 4.6 million Class A common shares, priced between US$14 and $16 a share, through the Cleveland-based investment firm of McDonald and Co. The issue is expected to be priced Wednesday or Thursday evening.
The company has been organized to serve as the sole general partner for the Cleveland Indians Baseball Co. Ltd. Partnership, which owns the ballclub and manages Jacobs Field, the Indians' ballpark.
The company's chairman, president, chief executive, and ballpark namesake, Richard Jacobs, will still own 49 percent of the team and retain voting control after the offering.
Some analysts said that it could be hard to attract investors outside the Indians' home turf, given the company's own concerns about future revenue growth.
"Management believes that much of the Indians' local revenue potential already has been realized and that future increases in revenue ... are likely to be substantially less than those realized over the past five years," the company said in a filing with the Securities and Exchange Commission covering the offering.
IPO Insider newsletter also noted recently: "One reason for the Cleveland Indians not being a home run offering is that all the proceeds are going to Mr. Jacobs to buy out the general partnership interests."
Aside from the buyout, there is widespread speculation that Jacobs, a well-known businessman who made his name in real estate, wants to use the proceeds to buy the Cleveland Browns, a new National Football League franchise.
For its part, McDonald and Co. has adhered strictly to the quiet period of not discussing an issue publicly before the offering.
But the company has worked overtime to pump up interest in the offering with a series of private meetings for potential investors. They even have a special toll-free phone number for potential investors to call.
Most IPOs demand a certain amount of institutional participation to be successful.
The Indians issue seems unlikely to attract much, if any, of that interest, so aside from fan loyalty, the question is what will attract buyers.
"In some ways you can look at them as an entertainment company.... The stock will react to the ballclub's successes and failures," said one potential investor who attended one of the meetings.
Analysts say that the team and the ballpark have been run successfully and point to the sellout crowds at Jacobs Field for the past three years as evidence of their success.
John Fitzgibbon, the editor of IPO Reporter, also noted that the stadium can always be used for other purposes to generate revenue.
However, he sees some drawbacks for the offering. "It's not an Internet stock," he said referring to the sizable buying interest in almost any company with business related to the Web.
He expects only a modest premium when the stock begins trading on the Nasdaq under the symbol "CLEV."
"I'm not expecting any home runs in the aftermarket," he said.
