Posted 7/2/2012 12:00 am
Updated 11 months ago
Wal-Mart long ago outgrew any need for the Little Rock investment bank that took it public in 1970, and that initial offering was so small as to be unthinkable today.
But Wal-Mart boosted Stephens Inc.’s cachet considerably, and its importance to the state of Arkansas has been immeasurable, according to Stephens CEO Warren Stephens.
“It’s not a once-in-a-generation story; I think it’s a once-in-a-century story,” Stephens said in a recent interview. “These things don’t happen very often, and to have Sam [Walton] and his family and all the management and all these successes and all of that based in Bentonville, Arkansas, has just been a huge blessing for the state and the people and, frankly, the image of Arkansas.
“People around the world knew where Bill Clinton was from because of Wal-Mart — and others by then. It wasn’t like they had never heard of Arkansas. They’d heard of Wal-Mart, and by then they had heard of Tyson and they’d heard of J.B. Hunt and Murphy Oil and Acxiom and a whole bunch of others.
“But there’s no way to overestimate the positive effect of Wal-Mart on Arkansas, Arkansas’ image, the economy of Arkansas and the people.”
Warren Stephens was just a kid, 13 years old, when the firm founded by his Uncle Witt and run by his father, Jack, co-managed the $5 million IPO. Even adjusted for four decades of inflation, that first offering of stock was minuscule compared with, say, Facebook’s ballyhooed $104 billion IPO in May.
“Quite amazing when you think about it,” Stephens said. “But it goes right to the heart of a point I’ve made to other people: We’ve eliminated the ability of a company to go raise $40 or $50 million because it’s too expensive.”
Jack and Witt Stephens already believed the young company was a good risk — their Union Life Insurance Co. had loaned money to Sam Walton to build stores — but Warren Stephens says they certainly didn’t imagine that it would become the largest retailer on Earth.
“There’s no way. Who would know that? There’s no way,” he said. “When they would go around and talk to investors around the U.S. and in the U.K., they would say, ‘Look, we really think this could be a billion-dollar company.’”
Even that might have been aggressive salesmanship since Wal-Mart’s annual revenue at the time was about $33 million.
“And to say a billion-dollar company — well, yeah,” Stephens said. “Kinda sorta.”
But for years, Wal-Mart was able to grow at a rate that first seemed unsustainable and then seemed unstoppable. Its annual sales reached $1 billion in less than 10 years.
“I think we’ve finally found some limit to the management’s ability to continue to grow the firm at a 20 percent growth rate,” Stephen said. “You know, at one time they thought it was going to be a billion dollars, and then they thought it would be $10 billion and then $100 billion. And now it’s about half a trillion: That’s where they can’t quite generate the growth that they want anymore.”
The last work Stephens Inc. did for the Walton family was some estate planning in the 1990s, “which we were pleased to do,” Stephens said. “But Wal-Mart doesn’t really need any equity offerings; they don’t need any financing to speak of. They issue commercial paper, which we don’t really do. They really don’t need any investment bank to speak of; they can do just about anything.”
In other words, Wal-Mart outgrew Stephens Inc. years ago.
“We hope a lot of our clients outgrow us,” he said. “That’s what we want — and to get to be associated with great growth companies. And Wal-Mart is arguably the greatest growth company in our lifetime and sustained over time.”