The BRS Labs IPO

By John Honovich, Published Aug 06, 2014, 12:00am EDT

BRS Labs is IPOing.

Maybe. Probably Not.

The TV Interview

This started with a Fox Business News TV segment with BRS Lab's President. A typical happy-happy conversation, at the end, the interviewer challenges him, "When are you going public?" to which he responds, "We are going to go public right around the corner. We are very excited about the future including that potential dynamic."

It's a totally solid answer. Display optimism without committing to specifics, softening it with terms like 'potential' and vague references like 'around the corner'.

Doubling Down

Then it gets strange.

That same day, BRS Labs sends out an email blast titled, "BRS Labs President breaks the news that company is going public soon during an interview on Fox News".

Then the next day, BRS Labs sends out another email blast titled definitively, "BRS Labs Announces That Company Will Go Public," referencing the same video.

In less than 48 hours, its goes from friendly banter about a 'potential dynamic' to an official announcement.

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Details on the IPO / CEO Resigns

BRS Labs told us they are not releasing any information about specific timing or government filings typically associated with IPOs (e.g., an S1).

However, BRS Labs has told the Houston Business News that their target IPO date is nearly a year from now (June 15, 2015), that BRS Lab's CEO has stepped down and they are searching for a new headquarters. Quite a flurry of activity across less than a week.

An IPO Would Be Great

BRS Labs has hundreds of investors, many of whom have invested more than 5 years ago. An IPO would allow them to cash out, a liquidity event they have been waiting for since BRS Labs floated the idea in 2008 that they would be acquired for a billion dollars. That has not happened.

Now is an excellent time, as the stock market has been on a long bullish trend, with massive gains. Because of this, investors would likely be more receptive to a younger, riskier company. As Fox Business observed, 2014 has had the most IPOs since the Dot-Com Bubble [link no longer available].

But It Would Be Hard

Especially in the US stock market, IPOs tend to require significant revenue levels ($100 million or more is fairly common). Also, investors tend to want businesses that have proven market traction in their core markets. BRS does not fit either.

BRS Labs, despite bold proclamations, has long struggled with revenue generation. For example, in 2011, they claimed to be "engaged in over $200 million in sales" but audited financials we obtained showed only $800,000 in sales for 2011.

Every year BRS touts exponential growth but even so, starting from a sub $1 million base in 2011, that's a long way to go to get to the revenue levels companies IPO'ing typically have.

Also, in the last year, BRS Labs has pivoted away from its former enterprise security core market to cloud analytics for home / SMB users and SCADA systems. This increases the risk as investors cannot see a long track record of success / acceptance in those new markets.

Hold On - Not an IPO?

However, as BRS Labs former CEO told the Houston Business Press:

"BRS Labs is still exploring potential avenues for its public offering, whether it be a direct public offering, or an IPO."

So it might not actually be a 'real' traditional, ring the bell on the floor, IPO. They could always do a reverse IPO as well.

Good Marketing Move Overall

Whether or not this happens, this is a good tactical marketing move as it gets people excited and pushes off concerns about the long struggles of the company.

Update: Did Not Go Public

Not surprisingly, BRS Labs has not gone public and it is past their target date of June 15, 2015. However, BRS Labs raised $18 million in Spring 2015 from the same array of smaller private investors. The company continues to show it is a master of getting money from mom n pop 'investors' but has still yet to provide a liquidity event.

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