In a move that has been widely anticipated for some time now, Wirepath Home Systems LLC, the corporate name for SnapAV, has filed paperwork with the SEC to preliminarily begin the process of registering their stock for sale to the public. We learn little in the rather terse announcement from the company, but many in the industry had expected this day would come for years now.
See more on SnapAV taking steps to go public
SnapAV announced this morning (Wednesday) that it has “confidentially submitted a draft registration statement” with the Securities and Exchange Commission (SEC) pursuant to Rule 135 under the Securities Act of 1933. This step is sort of a unofficial S-1 filing, in which the company asks the SEC to review a draft version of their proposed filing for any advice on the filing, including if there are any issues that need to be addressed or changes that need to be made.
Assuming the SEC makes few or no changes, then SnapAV can quickly file a formal version their S-1 registration with the Commission. Filing an S-1 registration is the first step down the path of offering shares of SnapAV’s stock for sale to the public through a stock exchange.
Number of Shares and Pricing in Question
The company noted that the number of shares they would offer and the price range those shares would be offered at has not yet been determined. They also noted that this step “does not constitute an offer to sell or the solicitation of an offer to buy securities…”
So…what’s the deal with this? In the private equity world, this is known as an “exit” or exit strategy. Hillman and Friedman, the private equity company that owns SnapAV, is seeking to obtain a financial return on their investment in the company and in order to do so, they will have the company file for a public offering. As part of this offering, Hillman and Friedman will also offer their ownership shares in the company, in the form of company stock, to be sold on a public exchange. This is a popular way to “exit” the investment and earn their return. Another way would be to sell it to another, usually larger, company.
A Disintermediation Play
SnapAV was started by a North Carolina integration company that observed that they could cut out the middleman by going directly to China and buying off-the-shelf products and have their own brand name silk-screened on it…much the way that many industry brands do. This strategy, known as a disintermediation play, allowed them more control over the value chain.
SnapAV also brought an additional layer of savvy to their brands, since – unlike most other industry brands – they were an integrator and knew how to structure programs and support to better serve integrators. With sharp pricing (more profitable to dealers) and popular high-touch support policies – such as easy-and-instant defective exchanges, a simple and efficient ordering portal, and copious product and training materials – SnapAV grew their popularity…and their dealer base.
Sold to Private Equity in 2013
Then, in 2013, SnapAV was sold by founder Jay Faison to private equity player General Atlantic. Four years later in 2017, General Atlantic executed their exit by selling the company to Hillman and Friedman (H&F), as Strata-gee reported on here… And now, H&F looks to take their exit in the stock market.
There may be some significance to the timing of this offering. While several factors can dictate when the optimal opportunity presents itself, there have been a rash of very successful stock offerings over the last several months. And as the country begins to open up and put the COVID pandemic in the rearview mirror, H&F may have determined that this is their peak return moment. They may also believe that after a series of acquisitions by the company of both brands and distributors, the company may be facing more limited options, or slower growth.
Will Wall Street Duties Throw SnapAV Management Off Their Game?
Going public offers relatively easy access to capital for companies, and is an attractive way to generate cash to fuel more growth. On the other hand, it can be a real challenge to the company’s management, as there are many regulations, requirements, filings, investor meetings, etc. to be dealt with. The pressure of quarterly reports can be a real distraction. All of which is to say, a new set of challenges await the company, if it achieves a successful offering.
Learn more about SnapAV by visiting: snapav.com.