Barron’s Exposes InnerWorkings, Warns Investors
By Randy Davidson
Published: January 14, 2007
Barron's, a sister publication of the Wall Street Journal, published a negative review of InnerWorkings in an article this weekend. InnerWorkings provides print procurement services to corporate clients in the United States. According to the company's web site, the firm uses proprietary technology to create a "competitive bid process to procure, purchase and deliver printed products as part of a comprehensive outsourced enterprise solution and in individual transactions."
Morgan Stanley has InnerWorkings executives on a roadshow to convince investors to put up $150 million in a follow-on stock offering. Barron's columnist Bill Alpert, is skeptical of the offering and the company. He notes that the company's stock is overvalued and former employees say the software does not work as it should.
- InnerWorkings appears to hide Eric P. Lefkofsky's relationship to the company. Alpert says Lefkofsky has a history of "busting investors after promising to radically transform bricks-and-mortar industries." Lefkofsky's last software venture ended in quick bankruptcy and fraud suits.
- The current road show and stock-offering with Morgan Stanley is, in part, aimed at cashing out much of Lefkofsky's stock. He and his affiliates own 35% of InnerWorkings.
- In August, just before InnerWorking's IPO, employees "stayed late padding the company's off-the-shelf FileMaker Pro database with an impressive-looking list of suppliers... dummied up some screen-shots of the software for the inside cover of the prospectus..." - this for potential investors.
In his article, Alpert says InnerWorkings is just a "glorified broker of print jobs" with $5.7 million in profits over the last 12 months and a market valuation of $700 million.
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