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By Root 428 0

in what the venture capital community colloquially calls a mezzanine financing, connections once again paid off. Among the sixteen buyers who bought shares at $10.50 apiece were some of the best-known venture-capital firms in the country, including New York’s LF Rothschild, Unterberg, Towbin, and the Brentwood Capital Corporation which was based in Southern California. One name on the list stood out: Xerox Corporation bought 100,000 shares though the company agreed not to buy more than 5 percent of Apple. The deal helped Apple gain access to Xerox’s research laboratories though Scott recalled, “We were careful they didn’t get a peek at our advance products,” and, on later occasions, the Xerox representative was not invited to meetings where sensitive topics were discussed. Yet the biggest buyer was Arthur Rock’s friend Fayez Sarofim, who bought 128,600 shares. Both Markkula and Jobs sold slightly over $1 million worth of stock.

During the following twelve months Arthur Rock kept a close eye on the vagaries of the new issues market and it was he, above all others, whose opinion and advice determined when Apple should brave the perils of a public stock offering.

Though most had recognized that Apple would eventually go public, the decision to abandon the relative tranquillity afforded private companies was made suddenly and unexpectedly. Among Apple’s top managers, there was some reluctance to head a public company. Jobs, for a time, was enchanted with the notion of emulating the enormous, privately held San Francisco construction company Bechtel. He liked the idea of not releasing information that might help competitors, of running a multinational company without having to endure pressure from stockholders, and of avoiding taunts from the gadflies who make a pastime of appearing at annual meetings. Along with his colleagues, Jobs was aware of the distractions created by due-diligence procedures, the legal work involved in preparing the stock prospectus, and the drain of lengthy tours to explain the strengths of the company to bankers and investors in major American and European cities.

Michael Scott wanted Apple to grow into a large enterprise without help from outsiders and roundly cursed his betes noires: lawyers who hampered his freedom to maneuver, federal bureaucrats who would swamp him with documents, and journalists who would do nothing but turn his thoughts to pap.

Aside from personal preferences, there were compelling reasons for Apple to go public. The market for new stock issues, which had been torpid in the years following the 1973-1974 recession, regained some of its spirit during 1980. Some of that reflected the 1978 cut in the maximum long-term capital-gains tax rate from 49 percent to 28 percent which had led to an enormous increase in the amount of money flowing into venture-capital funds. And though Apple was in business before the tax cut, other companies that were beginning to emerge from obscurity owed at least part of their existence to venture-capital funds. Inside Apple, surveys also projected that the number of shareholders—thanks to the distribution of stock options—would soon top five hundred at which point all companies under the 1934 Securities and Exchange Act are required to file public reports. But most of all Apple was in the fortunate position of not really needing a large injection of money.

All Apple’s founders and managers were aware that a public stock issue was an essential part of growing up. They heard, depending on the inclination of the speaker, the stock issue compared to a twenty-first birthday, the arrival of an heir, the betrothal of a daughter, or a bar mitzvah. So at a board meeting in August 1980, when Arthur Rock argued that a public offering was an obstacle that would have to be negotiated at some time or another, Apple’s directors decided to heed his advice. The timing, rather than the news itself, took people by surprise. Apple’s freshly hired vice-president of communications, Fred Hoar, had to draft a press statement before he was even given a desk. Meanwhile,