Going Private?

WebhireInc.'s stock was trading at 50 cents on Nasdaq when thecompany's executives decided they'd had enough pummeling onthe open market. The Lexington, Massachusetts, company wasn'tthe first to get fed up with the market's prolonged dry spell,but it wasn't just another late '90s flash-in-the-panstart-up, either. Webhire, which makes Web-based software forcompanies to manage their hiring processes, has been around since1982. Its financials were fairly solid: multiple straight quartersof positive cash flow and sales in the $14 million range. But itspitiful stock price and deflated market cap were enough to scareaway not just investors, but potential business partners andcustomers, too. At the same time, the company was spending roughly$400,000 per year on the document filing, legal work and auditsrequired of public companies. New Sarbanes-Oxley regulations wouldonly add to the bill.

Going totally private, though, would have cost a small fortuneas well, as it would have required the company to do either areverse split or a tender offer to buy back all outsider stock,notes Steve Allison, the company's CFO. "You need legaladvice and a fairness opinion from an investment bank, and thenthere's the cost of the transaction," he says, adding thatthe company would have had to pay a premium over the share price toavoid raising shareholder ire. "In these litigious days, youhave the danger of being sued."