Wal-Mart IPO Set the Stage for Global Expansion

by George Waldon  on Monday, Jul. 2, 2012 12:00 am  

Mike Smith, left, was syndicate manager and J.D. Simpson was a corporate finance executive when they led the initial public offering of Wal-Mart stock by their employer, Stephens Inc. of Little Rock, in 1970.

In 1969, Sam Walton was searching for the one thing that was keeping his upstart retailing chain in Bentonville from achieving great things: more money.

Walton and his cadre of executives and store managers had put together an efficient, profitable model that brought big-city discounting on a broad line of department store merchandise to markets that others deemed too small.

The only thing slowing the rollout of more Wal-Mart stores was working capital, and the ambitious retailer was growing increasingly frustrated with the situation.

Mike Smith, syndicate manager for Little Rock’s Stephens Inc. back then, approached Walton with a solution: Take the company public.

The more Smith learned about Wal-Mart’s operations in advance of the initial public offering, the more he was convinced that he had wandered into an epic business story in the making.

“If these guys can take this out of Bentonville and do what they’re doing, they are going to take over the retailing world,” Smith recalled thinking at the time.

Company officials were more worried about taking advantage of regional opportunities and maintaining the pace of opening stores than considering the global possibilities of their labors.

Sales rocketed from $12.7 million in 1968 to $21.5 million 12 months later as more Wal-Mart stores contributed to the revenue stream. But the company needed outside sources of cash to support its growth plans.

“In about ’69, the expansion took off,” said Ron Mayer, vice president and treasurer of the company at the time. “We really were running out of money. We were to the point where we either had to do something as far as an offering or curtail the expansion.”

In preparation for the IPO, a hodge-podge of ownership interests in different stores was consolidated under one corporate banner: Wal-Mart Stores Inc.

The corporation represented the merger of 78 partners that owned pieces of 32 stores, with the Walton family owning a majority stake in each. The stores also were a mixed bag of Wal-Mart Discount City, Ben Franklin, Walton’s Family Center and Ben Franklin Family Center.

In the years leading up to the IPO on Oct. 1, 1970, the company turned to local bankers for funding the construction of its stores and regional lenders for working capital.



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