48 Hours With theknot.com What's it like in the last few days before a company goes public? A little tense. Even a little scary. Here is one company's coming-out party.
By Carlye Adler

(FORTUNE Magazine) – Carley Roney and David Liu were film students at New York University in the late 1980s, living in dorm rooms and struggling to make ends meet. Late last year they joined the ranks of the smart, gutsy, and lucky who have hit the jackpot called the Internet IPO. Their vehicle to riches: a Website called theknot.com, which was inspired by Roney and Liu's own less-than-picture-perfect wedding in 1993.

As graduates of Spike Lee's alma mater, Roney, Liu, and their partners and former classmates Rob Fassino and Michael Wolfson find it a bit embarrassing to talk seriously of lace and ring sizes. But they knew an opportunity when they saw one: to take the stodgy world of bridal prep and give it an Internet makeover. Soon after they launched the site on the Web in 1997, it was attracting such advertisers as Disney and Lenox China. Now 1,700 couples register each day.

Investors were just as charmed. When the group was earnestly pitching the Knot in 1996 to Ted Leonsis, AOL's content guru, he interrupted, saying, "Yeah, yeah. All I know is, I smell money."

In December, Leonsis' nose was put to the real test when Credit Suisse First Boston, several other banks, and the Knot's venture investors decided the time was ripe to take theknot.com public. In Wall Street tradition, an IPO used to be a pretty serious affair, following years of hard work complete with pinstriped consultations and careful discussions about price/earnings ratios. Not that the Knot execs hadn't worked hard to get to that point (well, for about 40 months they had). But here, as with so many economic realities, the Internet has changed the rules. IPOs are now frothier affairs, and the cast of characters doesn't show quite the gravity an old-timer would expect.

The Knot CEO Liu, for example, went on the traditional, grueling road show to woo major moneybags: eight meetings a day for nine days and on two continents. But Liu, just for kicks, documented the whole adventure with his new $900 digital camera, sending home images of luxury hotel bathrooms and his Scottish chauffeur, Bob, to the Knot's headquarters in New York City's SoHo.

The 48 hours before the IPO were the same odd mix: long hours, high tension, and...hot tubs. But perhaps the emotions of this fab foursome--all in their early 30s--aren't so different from those of any nervous executives before the big day when they take on Wall Street for the first time.

Reporter Carlye Adler met up with the group at the Camelback resort in Scottsdale, Ariz., on Tuesday, Nov. 30, the day before the stock was scheduled to be priced. They were having a meeting that moment in the Jacuzzi--the same one in which, three years earlier, the partners had toasted themselves with hot fudge sundaes (yes, in the hot tub) after winning the nod from AOL.

11:30 P.M.: Steam tendrils rise from the hot tub into the cold desert night. Naturally David's face is beaded with sweat. It's also tight with tension. David, his partners, and the Knot's bankers and backers are all in Scottsdale for a conference of investors and analysts, come to judge the latest offering of high-tech companies. Just back from his trip, David is exhausted, his nerves frayed. "Come on," says Carley. "I know you're tired, but smile." She strokes his hair. "Give me that $30 million smile, that $60 million smile, whatever it is we're worth now." The rest of the group is giddy with anticipation. "What do you think Candice did before the pricing?" jokes Rob, referring to Internet luminary Candice Carpenter, whose iVillage, also an early recipient of funding from AOL (which plans to acquire Time Warner, parent of this magazine's publisher), had a gangbusters IPO in 1999. Conversation segues to Carley and David's toddler, Havana, who's home with Grandma; Web advertising; pashmina scarves; and Michael's wedding--still unplanned--in a few months. They drink champagne, smoke cigarettes, and giggle.

2:00 A.M.: David and Carley go to their room at the nearby Ritz-Carlton. Michael and Rob are staying at the Camelback. Three years ago, in the Knot's penny-pinching days, the two men bunked together. This time each has his own room. But Rob can't sleep. Until almost dawn the guy who doesn't have a TV in his New York pad watches reruns of I Love Lucy and The Brady Bunch.

10:00 A.M.: The pricing meeting is set for two o'clock this afternoon (Central Time, after the market's New York close). To calm his charges' nerves, the group's investment banker, Phil Berkowitz, has arranged a golf game for David and his two top executives, Sandy Stiles and Rich Szefc. (Well seasoned and recently arrived from Random House, Sandy and Rich are known as "the grownups.") Golfing on your pricing day isn't exactly Wall Street tradition. Neither, for that matter, is doing the pricing at a resort conference where the entertainment includes Robin Williams. Even on the world-class course at the Phoenician Resort, the golfers--for the most part neither very expert nor very country club--find it hard to concentrate. Their cell phones ring every few minutes with calls from their bankers about new institutional interest.

12:00 NOON: The golfers meet the rest of the team for lunch at the Phoenician's patio restaurant, but no one is eating. Rob passes Sandy the Advil. David, Sandy, and Rich run a last-minute check to see whether any more investors have bid. It's hard to sit idle, Carley moans. Creating the company and building it up was their own project. Now the bankers are in charge. Tomorrow the Knot will be a "real" company, they tell themselves. Or so everyone else keeps telling them. But Carley is miffed: "What were we before?" A few weeks ago an employee told Carley she'd given away all her suits when she'd hired on at the Internet startup. "Do I have to buy new suits now that we're public?" she'd asked. "No," Carley assured her. "It's not like we're IBM."

1:30 P.M.: David, Sandy, and Rich, part of the pricing committee, jump up and head for the meeting. "Uh, have fun. Is that what we're supposed to say?" Rob asks. Sandy smiles nervously. "I don't think so," she says. With little to do but worry, Carley, Rob, and Michael start wondering what's happening back at headquarters in New York. But then they focus: They have to write a toast for the post-IPO party. With Christmas approaching, their events coordinator has asked them to do a takeoff on the poem " 'Twas the Night Before Christmas." But no one can get beyond "not a creature was stirring." Says Carley: "I know there's a kerchief in there somewhere." Michael calls New York to ask someone to fax the poem.

2:00 P.M.: In a conference room at the Phoenician, CSFB bankers and Knot executives debate where to set the price at which the stock will be sold to the initial investors. This used to be an exact science; the price was based on a company's profits and strength in its market. Theknot.com had a mere $2.6 million in revenues last year and has lost $10 million since 1996. No matter--it's far ahead of a lot of Website also-rans; profits are declasse. The game now is revenue projections and tea-leaf readings of what the public will think is hot. Still, it's not an easy call. The Knot could go with $8 a share, giving the stock plenty of room to rise. But that might leave the impression that the company isn't so confident. Or the Knot could set the stock at $10. The stock would not necessarily go up, but the Knot would make more money. Pricing it out of range, however, could annoy big investors who have indicated interest. "It's all about psychology. It's all about momentum," stresses Phil. The good news: Orders are pouring in--15 times more than there are shares. By three o'clock, it's decided: $10.

6:00 P.M.: Out of Arizona and on the way back to New York. The executive team is flying in the CSFB corporate jet, one of those perks they're almost used to. They play poker, snooze, and enjoy the break from cell phones and e-mail.

10:30 A.M.: "I am not wearing high-waters on the day of my IPO!" David is looking at himself in the mirror of his and Carley's home in Brooklyn Heights. He and the other Knot men had agreed to wear tuxes. But the tailor screwed up, and David's pants are too short. He changes into a dark suit with a boutonniere. Carley was going to wear a wedding dress, but she decides instead on a black skirt and sweater, and wraps a shimmery gold throw around her shoulders. By the time the team is gathered at the Knot's headquarters in SoHo, the limos from CSFB--and the cameras from CNN--are waiting.

11:15 A.M.: At Credit Suisse's Madison Avenue offices, Phil and the Knot team sit in a glass-walled room on the edge of the bank's vast trading floor, watching hundreds of traders hunched over their computers. Anxiety is sharp, but Nasdaq--on which the Knot will trade--has been flying high; it could be a great day for an IPO. A tense Rich is not making his usual wry remarks. Phil orders him a martini, and a waiter in white gloves brings it. Then Phil takes the group onto the floor and introduces them to the trader who will determine the opening price based on the level of demand this morning--it can be higher or lower than the offering price. As the founders squeeze together to look over the trader's shoulders, he begins tightening the spread. "Twelve to 15 dollars," he says. Then he shouts to the floor: "Knot will open in one minute!'' David and Sandy are trembling.

11:20 A.M.: "Knot is open, trading at 13 and a quarter," the trader says. Up to $15, down to $14, soaring to $21, dropping to $12.50. Up. Down. Down. Down. "Don't sell!" Michael yells into the air. "Who'd want to sell this stock!?" Jessica Kleiman, the Knot's aggressive publicist, had asked the founders to blow bubbles (the kind sold on the site, where they're marketed as an alternative to the rice usually thrown at the bride and groom). But when trading started, they forget all about publicity stunts. "It was not a light moment," Rob says later.

12:30 P.M.: Mindful of the TV news cameras outside, the four founders strut from the CSFB offices, beaming. Carley kisses David for the cameras. All four stammer at once: "It was exciting...nerve-racking...amazing...terrifying." Fresh from his road-trip training, David sounds the familiar notes of a public-company CEO: "We exceeded expectations." But in the limo, Carley vents some anxiety. "iVillage went to $95 the first day," she says. (It was priced at $24, opened at $100, and closed just below that.) "I know that's not us. But maybe we'll hit $75." She repeats the dictum about prices they've all heard so often: "It's not supposed to be personal. But it is."

12:50 P.M.: The stock is at $18.25. When the team arrives back at the Knot's headquarters, black-tie-clad employees crowd around a computer in the lobby, watching the stock and calculating as their new fortunes climb and dive. All 100-some Knot employees have options.

1:10 P.M.: David is at CNBC studios uptown for the network's show Power Lunch. In the SoHo office all the employees squeeze into a small conference room to watch the boss on TV. A graphic on the screen flashes the company's trading price. "Oh my God, there's the Knot!" someone shouts. David tells CNBC host Bill Griffeth that he wants the Knot to be the Amazon.com of the wedding business. Cheers fill the room. Then David is off the screen. Carley runs back to the lobby to see whether the stock has gone up, but it's sliding a bit, now to $16. She looks disappointed. "It was up while he was on," one employee offers comfortingly. Carley walks away without responding.

3:00 P.M.: The party has started. Carley cuts a huge cake, iced with white flowers and made by one of New York City's most beloved bakeries, the Cupcake Cafe (already 11 years old and still no IPO!). David offers a toast. Everyone jostles around to hug the founders. Carley drops some cake on the floor and kicks it under the table. Someone spills champagne on her shoe.

4:00 P.M.: The stock closes at $15. Ebullient, employees climb into limousines that take them to a nightclub for the next celebration bash, a party with a tropical honeymoon theme. Carley is wearing the wedding gown now, with an $80,000 diamond necklace lent to her by Mondera.com, a jeweler that advertises on the Knot. At the club music blasts and bartenders serve drinks with tiny paper umbrellas. The founders offer their toast to David: " 'Twas the night before closing the QVC round/But the Knot didn't pause, didn't go out on the town/For the market was hot, and the competitors there/David's cry, 'Let's go public,' soon filled the air."

11:30 P.M.: The party is winding down. Carley, David, Rob, and Michael are ready to go home. Tomorrow is a workday. Thousands of new owners will be watching for big results. The stock market will provide its relentless commentary. And, of course, there will be meetings.

Epilogue: More than 500 companies went public in 1999, raising $68.9 billion, according to Thomson Financial Securities Data. Internet stocks were up more than 150% last year.

But according to RS Investment Management, more than 100 of last year's IPOs were trading below their offering prices (iVillage was at $18.25, way below its IPO price). At press time the Knot stock was hovering at its $10 offering price and had even closed below that. Not exactly a dream come true yet--even if each founder has about a 5% stake and is worth $6.7 million.

The Knot raised $35 million by going public. But that, too, comes at a price. Before, there was always a moment to relax and get out of the spotlight. Now there are numbers to report, expectations to exceed, analysts to appease. "We made it to the finish line," says Carley, "and now it's like, 'Oh, damn, the work has just begun.' "

And everyone at the Knot knows it. Days after the opening, the site crashed, and a frustrated Carley couldn't log on to the home page. "Hey, are we down?" she yelled out to the staff in the packed SoHo loft space. A techie answered, but not with the information she was looking for. "No," he called back. "We're up. I think around $11.50."