Manhattan Adult Entertainment: Initial Penthouse Offering, Take Two: Go Public or Go Bust
Feelings about the deal in the adult entertainment industry were mixed. Many were optimistic, hoping that the acquisition would signal an opportunity for the industry to break into mainstream finance, showing a maturity that long eluded the skin business. But the zeal was tempered with concern: Nobody could figure out the transaction. Penthouse was universally judged to have overpaid for Various, and the dollars involved left people perplexed. It was clear that outside capital had been pumped into Penthouse to make the acquisition possible, but there didn’t seem to be much value to the approach beyond the opacity afforded by the ailing adult media company.
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By the end of 2008, there was no hope for Penthouse. It had blown through its loan covenants and needed to come up with more than $400 million on short notice. Credit markets were no longer an option, and FFN’s existing investors were ostensibly unwilling to double down on the company. The only choice it had was to go public. So Penthous …