Al Gore likes awards, and awards like him. He famously won the Nobel Peace Price. People think he won an Oscar, but he really just stood on the stage. He has, though, won an Emmy, a Webby, and two Quill awards, which is like a poor man's Pulitzer for books. He has yet to win a Grammy (it would be entertaining to see him try), but drew wild applause just by presenting one. Now Gore is looking for accolades on Wall Street - namely, that old brass ring known as an IPO. A successful public offering is awarded most often to companies with proven profits, the promise that those profits will grow and a business plan that seduces investors into steamy fantasies of capital gains. Gore's company, Current Media, has none of those right now. But it does have Al Gore. His brand is so bright and shiny these days that it might prove a powerful intoxicant, leading investors to let Current slip into the public markets. That would be too bad, because Current Media isn't ready for prime time. It's being rushed out in a premature stage, and reading the company's S-1 filing, you can't help feeling that it's going public now largely because it's close to running out of cash. That's not to say Current is badly run. It's an intriguing hybrid, a trendy if low-profile love child of a cable channel and a social networking site. I spent some time looking at its videos, and while they're hit-and-miss, the hits are pretty good. And it has experienced managers, chief among them co-founder Joel Hyatt, who has an even more eclectic background than Gore. As a utilities regulator in California, Hyatt shot down an idiotic proposal to make people dial 11 digits even when calling a next-door neighbor. He worked with Bill Gross' Idealab, one of the rare Internet incubators to hatch some good eggs; he has lectured on entrepreneurship at Stanford's business school; and he joined Hewlett-Packard's ( HPQ) board last year. So unless you were to dig into the S-1 filing, you might think this IPO could fly. But it probably won't, because it shows some key signs of an undercooked IPO. First, Current Media isn't profitable. Far from it, in fact: It has lost $37.4 million since it started recording revenue less than four years ago. Compare that with $140 million in aggregate revenue, and you have a company that has spent $1.27 for every $1 taken in. As bad as that sounds, that excludes the 8% return it has paid to preferred shareholders for the past three years. Throw that in, and Current has put out $1.41 for every dollar in revenue. Even so, Current Media hasn't been unprofitable every single year. In 2004, it posted a profit of $460,000 on revenue of $14 million. That was because it bought Newsworld International, a cable channel for global news junkies, for $71 million in May of 2004. For the last eight months of that year, the no-nonsense news channel stayed profitable. But in 2005 -- once it was transformed into the hipper, youth-oriented Current TV -- the losses began. Current's 2005 loss was $14.3 million, more than 30 times the previous year's profit. Current Media took Newsworld International, a modestly profitable gumball machine, and turned it into a neon-lit producer of sourball jawbreakers. Here's another fishy thing: Although the company's losses are dark and deep, it has gone around boasting of profitability this past year. Liz Gannes, a blogger at NewTeeVee.com, called the company on it. It turns out Current's profit was based on EBITDA cash earnings. That is, it excluded depreciation and amortization, interest payments and stock-based compensation.
True enough, if you exclude all that, Current is indeed profitable. But it's akin to saying one's family tree is sane if you exclude the blazing alcoholic, the UFO traveler and the celebrity stalker. Breaking it all down, we have: $6 million in depreciation and amortization in 2007 alone, $4.1 million in interest expenses, and $2.4 million in stock-based compensation to employees and "affliates" that are excluded under GAAP accounting. In all, that amounts to $12.5 million last year that Current Media wants you to ignore when you think of it as profitable. If you can stand one more metric, consider this: Operating cash flow, the most sober measure of an IPO candidate's health, has been negative for three years: negative $4 million in 2007, negative $5 million in 2006 and negative $7 million in 2005. The company has bled $16 million in cash in three years. By contrast, MercadoLibre ( MELI), whose stock is up 132% from its IPO, saw its operating cash flow nearly double to $6.2 million before listing. ComScore ( SCOR), up 62%, saw its operating cash flow more than double to $11 million. Should this bother Gore and Hyatt, who were each paid more than $1 million last year? (Gore also owns 3.7 million shares in Current and Hyatt 3.5 million shares. Those shares have 10 times the voting power of other shares.) To get his million-dollar-plus salary plus all that founder's stock and autocratic control of Current, Gore had to put up a million-dollar loan. As the Gershwin boys once said, nice work if you can get it. So why, you might ask, would a company like Current Media -- a company short on history yet long on red ink, whose audience is by its own admission so tiny that Nielsen won't track it, and whose IPO's terms are unfriendly to new investors -- try to go public with a recession looming? Simple: After burning through close to $40 million, the company has only $2.2 million in cash and short-term investments on hand. Yet it has $36 million in debt outstanding. The supposed $100 million from this IPO would fix all that. But that begs the question of who would pony up that $100 million. Current Media isn't likely to go public in this uncertain market. And I hope for its sake it does have to wait a bit. Otherwise, it could decline in value and hurt the company's overall image. That would offer Mr. Gore another award, one he may not covet very much: The 2008 IPO Booby Prize.