In Ramp-Up to IPO, 'Penthouse' Downsizes

The owners of Penthouse are anticipating a big cash infusion soon in the form of the $460 million initial public offering announced last month. So why are they laying people off?

Seven employees of the dwindling nudie magazine lost their jobs this week (among them Jetpack Dreams author and very occasional Mixed Media contributor Mac Montandon).

Marc Bell, CEO of Penthouse parent FriendFinder Networks, insists it wasn't a layoff, per se, but a redistribution. "We downsized the New York office and relocated jobs out to California," he says. "We have editorial operations out there for our website so we'll have duplicity." (Unfortunate word choice sic.) He says there's no plan to move the entire operation to the West Coast: "If there's a reason for someone to be in New York, they'll be in New York."

Overall, says Bell, "We're continuing to add employees. If you look at our numbers, we are doing spectacular. We're firing on all cylinders, financially." Be that as it may, investment banks have been loath to touch the IPO, as Breakingviews recently noted, perhaps because of suspicion that FriendFinder derives part of its revenues from thinly-veiled prostitution listings, or perhaps merely because of what The Wall Street Journal described as "crushing levels of debt" and the lack of "much growth in the growth side of the company's business."

Update: Felix Salmon's take on why FriendFinder's IPO lacks legs:

If anybody really wanted to own Friendfinder Networks, all they would need to do is buy up its bonds, refuse to modify the covenants, accelerate the debt, and force the company into bankruptcy, where it would be handed over to its creditors, with shareholders being wiped out. Given that very realistic scenario, it's very hard to see why anybody at all should be interested in participating in this IPO.