The Way For Some to Go

Like law firms or other businesses that have confidential relationships with clients, nearly all U.S. advertising agencies are privately owned. Last year Manhattan's frisky Papert, Koenig, Lois created a sensation on Madison Avenue by going public. The sale of shares made near-millionaires out of the agency's three young founders, and stock that came out at $6 a share is now up around $10. Last week Foote, Cone & Belding--the nation's seventh biggest ad agency, with billings of $135 million--put some shares on the market. It looked as if public is the way to go.

The boss of Foote, Cone--Fairfax Mastick Cone, 61--concedes that advertising seems a risky investment because clients are continuously switching and an agency's only real asset is brainpower, a perishable and uncertain commodity. "Our inventory goes down the elevator every night," muses Cone. But he sees a sign of stability in his agency's steady growth, up 40% in four years.

Foote, Cone sold 500,000 of its 1.2 million common shares. Simply by making a market, the agency boosted its shares from the book value of $6 to the offering price of $15.50. "Fax" Cone sold 38,000 of his shares for a tidy $541,500, while President Holland W. Taylor disposed of 46,313 shares for $659,960 and Chairman Robert F. Carney sold 83,041 for $1,183,000--taxable at no more than 25% as capital gains. These key executives relinquished only part of their holdings.

Although a public market for shares can also potentially help an agency to raise expansion cash and recruit fresh talent by offering stock options, some of Foote, Cone's competitors were skeptical about letting the investors in. A Young & Rubicam executive thought that the public disclosure of low agency profits would soon disillusion investors. Others felt that an agency's shares would plummet whenever it lost a rich account. But many on Madison Avenue were reconsidering. Said President Rudolph Montgelas of the Ted Bates agency, the nation's fifth largest: "If Foote, Cone is a great success, two or three other agencies may go public next year. But an agency without a crack record of stability and earnings should not try it."

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