Big Dog Chases IPO, Hoping to Fetch $49 Million

Casual-clothing maker Big Dog Holdings Inc. wants to run with the big dogs on Wall Street.

The Santa Barbara-based apparel firm--known for slogans like “If you can’t run with the big dogs, stay on the porch” and for clothes featuring a St. Bernard--plans to sell stock to the public for the first time through an initial public offering worth as much as $49 million.

The maker of T-shirts, shorts and casual wear filed late this week to sell stock, telling potential investors the company conveys a sense of fun and a “Big Dog attitude” that allows customers to feel they are a “Big Dog.”

Big Dog markets to baby boomers and their children and targets those who have a strong affinity for the dog-related images and Big Dog themes such as “Lead, follow or get out of the way.”

Fashion stocks, however, have been the dogs of Wall Street lately, with many shares dropping dramatically after a company’s IPO.

Donna Karan, the New York fashion designer, has seen its shares drop nearly 50% from June 1996, when the company went public at $24 a share. Irvine-based sportswear designer Mossimo Inc. went public in February last year at $18 a share, rose as high as $50, but is now trading in the $7-a-share range.

Still, Big Dog might be right in deciding this could be its time in the sun.

Investors have shown a renewed appetite in recent months for IPO stocks in general, and specifically for apparel companies. In June, Polo Ralph Lauren Corp. went public with a $767-million offering and saw its stock price jump 21% in the first day.

Also, unlike a Mossimo or a Donna Karan, Big Dog is not a high-fashion company dependent on the colors and styles of a season. Its casual clothes can be worn through many seasons.

Big Dog was started in 1982 under the name Sierra West Manufacturing and sold shorts made of high-tech material, which became known among river rafters and beach-goers as “big puppies.”

It had limited sales until 1993, when current management bought the business and expanded the Big Dog line. As of last month, Big Dog had 134 of its own retail stores, mostly in malls, up from five stores in 1993. Sales have increased to $68.7 million in 1996 from $11.4 million in 1993.

Although Big Dog was profitable last year with net income of $635,000, or 6 cents a share, the company logged a loss of $1.8 million, or 17 cents a share, for the first six months of this year, compared with a loss of $1.54 million, or 15 cents a share, for the period last year, the SEC filing said.

While Big Dog plans to offer 2.8 million shares in its IPO, some of the company’s executives and other shareholders will sell 700,000 more shares. That will give new investors a 22% ownership stake in the company.

Big Dog Chairman Fred Kayne, who was a managing director and board member at Wall Street investment bank Bear Stearns & Co. in Los Angeles, plans to sell 335,000 shares in the offering, cutting his ownership stake to 49% from 66%.

The company plans to price the shares, which would trade on Nasdaq, at $12 to $14 each. Robertson, Stephens & Co. and Hambrecht & Quist and Needham & Co. will underwrite the offering, which could be sold as early as September.