Shareholder interests play second fiddle to Violin’s management

Contact: Scott Denne

Violin Memory isn’t ready to be a public company by almost any measure: it has less than three years of sales, lumpy growth and is hemorrhaging money. Despite all that, Violin pushed out an offering in time to meet a deadline that almost guarantees a solid return for its management. Its chief executive, Don Basile, gets a grant of 1.25 million shares ($10m at the IPO price) if the company has its offering before the end of this month – a highly unusual deal for an emerging tech firm.

Other members of management have similar, but smaller, arrangements. COO Dixon Doll Jr. receives $5.4m worth of stock at the IPO price and CFO Cory Sindelar gets about $1.7m. We’d note that these numbers have been revised downward from an August version of its prospectus, which had management receiving double the number of shares.

Violin priced at the low end of its range and began trading this morning. By midday, shares of the flash storage vendor were trading down 8% from its IPO price. It’s no surprise to us. In an earlier report, we noted that Violin was losing more money than it was bringing in and that its quarterly revenue growth suffered after losing an OEM deal with HP.

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