Al Gore's Convenient IPO

CurrentTV's parent is launching a public offering whose terms, though sweet for the company's high-profile founder, may be inconvenient for investors

by Ron Grover

Al Gore's CurrentTV is about to go public, and he stands to make a bundle from the IPO. Getty Images

What's an Emmy worth? If you're former Vice-President Al Gore, it's worth just north of $1 million a year and roughly another $48 million in stock. That's a hefty sum for a guy who of late has traveled the globe as a goodwill ambassador for mankind, stressing the need for humanity to wake up to the dangers of global warming.

Where's Gore getting the dough? From a tiny, lightly watched cable TV channel called CurrentTV. The channel is available in roughly 41 million U.S. homes (about half the viewers of ESPN or CNN) and over the last three years has lost $31.5 million while increasing revenues to $53.5 million from $23.4 million three years ago. Still, CurrentTV may be the next hot thing—it won the Emmy last year for its ability to present a forum for user-generated content from its mostly younger viewers. "It is true participatory media," Gore told me in a Beverly Hills hotel room the day after the Emmy presentation, grasping the gold statue as he spoke.

Cash and Control

Or maybe it's an IPO bust waiting to happen? In the financial election of his life, Al Gore is betting that investors will vote with their dollars for him and his big idea. CurrentTV's parent company, Current Media, hopes to raise $100 million in a public offering it filed on Jan. 28. Some of the money will go to pay off lenders, who include a couple of Democratic Party biggies that joined the onetime Veep to launch a new style of citizen-journalism. Of course the IPO will also help make Gore, who sits on the board of Apple (AAPL) and is a senior adviser to Google (GOOG), a sizable bundle of cash.

Something about this deal just doesn't sit right with me. Gore isn't just taking piles of cash. According to the filing Gore, who is listed as executive chairman, and his CEO partner, lawyer-turned-entrepreneur Joel Hyatt, each loaned the company $1 million to get it started. They'll get that back in the IPO. But the two guys also collect hefty salaries for a company that hasn't shown a profit in three years—taking down $491,677 apiece last year in cash, plus bonuses of $550,000 each for, in Gore's case, helping get the company new affiliate agreements, broadening exiting agreements, and putting together a management team. The two currently receive $600,000 a year in salary and are eligible for additional bonuses, according to the IPO filing.

By comparison, at the time of the Google IPO in 2004, its two founders were each taking home a total of $356,556 in salary and bonuses, while sitting on top of a company that had earned nearly $106 million the year before.

Outsize Shareholder Clout

What really sticks out to me, however, is that Gore and Hyatt, who started the company in 2002 (and jump-started it with a broken-down Newsworld International channel they bought for $70.9 million) will have the kind of hammer-lock control over the company decried by shareholder rights activists and many of the same unions that supported Gore for years. According to the filing, once the dust has settled Gore and Hyatt will control all of the company's Class B shares, which give them 10 votes for every vote a common shareholder gets with a Class A share.

The company hasn't said how many shares it will issue, so there is no way of knowing just how much control Gore and Hyatt will exercise. But the Google founders, who also control their company's Class B shares, hold nearly 56% voting control of the company (of course, far as I know, they never ran for public office).

CurrentTV executives say they can't comment during the IPO quiet period. But a source with knowledge of what the board was thinking says that it gave Gore and Hyatt B shares to maintain the channel's editorial integrity and vision, and for advertisers to be sure of its future direction.