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How come music instrument companies aren't traded on the stock market?
Fun fact: Most super-big musical instrument manufacturers are still run like mom-and-pop businesses.
There are very, very few companies who make musical instruments that are actually traded on the stock market. One of them is Yamaha. But then again, Yamaha obviously makes a lot more than just guitars. If you were expecting Fender Musical or Gibson to be there, nope. Both of those are privately held companies.
Back in 2012, Fender almost entered the stock market, but withdrew.
"Current market conditions and concerns about economic conditions in Europe do not support completing an initial public offering at what we believe to be an appropriate valuation at this time," said Larry E. Thomas, Fender’s Chief Executive Officer, in a statement.
In plain English, that means Fender would have taken a bath and gone out of business in less than a year had they gone through with their IPO (that means Initial Public Offering in case you know nothing about the stock market.) Fender's valuation was all sorts of screwed up, and if you don't know what that means, trust me, you don't want to know.
Why does any company want to be publicly traded?
Simple answer. Cash. Gobs and gobs of cash. When a company goes public, that opens the door for piles and piles of money to come in that they otherwise didn't have before.
How come music instrument makers don't get into the publicly traded game?
There have been several guitar companies in the past aside from FMIC that tried to or did get into the stock market, but it's never worked.
Fender is actually a really good example of this. When the company was owned by CBS, they squeezed every last dime they could out of it, cut costs everywhere they could, bean-countered it to death and still couldn't turn a buck. CBS did not know guitars, so they cut it loose. And the reason for that is that CBS isn't a guitar company. They're a publicly traded broadcasting company. Big difference.
Ultimately, guitar companies are better off as mom-and-pop outfits. I don't think there's any way a guitar company could survive under the constant pressure of investors due to the fact so much freedom of operation is lost.
The stock market is vicious. It's a place that makes and breaks companies every day. And when a publicly traded company isn't performing in a way the stockholders like, the company gets dumped, dumped hard, and if investor confidence is lost, the company is dead as a doornail.
When a guitar company has a bad year, as a privately owned enterprise it can slow things down, regroup, plan things out, take the time necessary to get things going in the right direction and ease back into the swing of things at their pace.
As a publicly traded company, there's no time for that. A stock trading at 3 bucks can dive down to 10 cents and stay there if the investors feel the company is past its prime and ready to be buried. And believe me, they will bury it. It has nothing to do with the company but rather everything to do with money. Investors invest in companies that will make them money. When that company stops making them money, they dump the stock and just move on to another company; that's the way it is.
The only reason any guitar company survives and makes any money today is because they're not publicly traded. Guitar making is something that is an old-school craft, and every time a company has tried to fully corporatize it by going public, it ultimately fails.
Does it cost more to operate a guitar company privately? Yes. Is more legwork involved to make things profitable? No. Board room execs would tell you otherwise, but it isn't true.
What makes stuff sell that a guitar company makes are good leaders with good ideas. But if the leaders are nothing but crusty old dudes with white hair that are more than half deaf, that's pretty much a recipe for failure. Yeah, they know numbers, but that's all they know, because I guarantee they don't know anything about guitars or why they're cool in the first place.
Once the larger guitar makers go back to hiring real guys who play real guitars that have a better pulse on what guitar players actually like, then they'll get the forward business motion they're looking for.
Published 2014 Oct 20
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