Atari Corporation Goes Public in 1986

A look at the prospectus and form S-1

Uploaded by Kay Savetz in February 2024, the Atari Corporation Prospectus and Form S-1 is a treasure trove of information at almost 400 pages!

Filed in September 1986, Atari proposed selling just over 5 million shares of stock at an offering price of $13.50, which would raise nearly $70 million.

The IPO occurred less than two months later in early November.

From the New York Times, November 8, 1986:

The Atari Corporation, based in Sunnyvale, Calif., made its initial public offering of 4.5 million shares, or 16 percent of the company.

While the shares opened at $11.50, which was at the low end of the range specified in Atari's prospectus, they moved up to $12.50 by the close of trading today on the American Stock Exchange. Atari's prospectus indicated it had net income of $12.4 million in the first half of 1986 on sales of $105.6 million. It lost about $26.7 million in 1985.

As you can see the IPO opened at the low end of what was laid out in the prospectus, with a price of $11.50 (about $33 in 2024) raising about $50 million instead (about $143 million in 2024) of about $70 million. $50 million was still a good chuck of cash!

About a year later in October 1987 Atari purchased the Federated Group, a small chain electronics stores. This purchase did not go well and in the end, Atari lost a lot of money on this deal. Not that much could have saved a small computer company by the early 1990s, but this deal certainly did not help things.

In the prospectus, the page Atari line of computer systems mentioned and had pictures of the 520ST, 65XE, 1040ST and 130XE.

I especially liked the background on Atari itself:

Atari Corporation (the “Company”) develops, manufactures and markets microcomputer systems for personal and business use and video game systems, designed to offer advanced technology at low prices. The Company was founded in May 1984 by Jack Tramiel, founder and former Chief Executive Officer of Commodore International Limited. In July 1984, the Company acquired from certain associated entities of Warner Communications, Inc. (collectively referred to as “WCI") certain assets, including 8-bit microcomputer and video game system inventories and the right to use the Atari name and logo, and assumed certain liabilities. See “Business — The WCI Transaction.” Substantially all of the Company’s revenues from its inception through June 1985 resulted from liquidation of the microcomputer and video game system inventories included in the assets acquired from WCI.

This part at the end of the background section describes how Atari will pay back Warner:

Since July 1984, WCI has advanced approximately $24.7 million of working capital to the Company for payment of certain liabilities assumed in the 1984 asset acquisition. Concurrently with the consummation of this offering, the Company will issue to WCI 7.1 million shares of Common Stock and pay to WCI approximately $36.1 million as the purchase price of net assets acquired from WCI and in satisfaction of WCI’s working capital loans to the Company and accrued interest. See “Business — The WCI Transaction.

Here you can see that Atari lost $61 million in 1984, lost $14 million in 1985 and so far in 1986 had a $12.5 million profit.

More financial data:

This prospectus does confirm that nearly all of Atari revenue through June 1985 were from sales of equipment they was included with the purchase from Warner: 800XL, 600XL, 2600, 5200.

The 7800 ProSystem was introduced in May 1986, the 130XE in the 2nd quarter of 1985 and the 520ST in the 3rd quarter of 1985.

Quarterly Results:

Product Breakdown:

More Interesting Quotes from the Prospectus

The rest of this post is for premium subscribers and includes more interesting quotes and notes from the prospectus.