Morningstar is going to IPO. The question is, is this news a sign of a return to normalcy? Or, is it the return of the bubble?

The Chicago-based fund tracker disclosed in its quite lengthy S-1 filing with the SEC that it plans to sell up to $100 million of common stock. The filing did not disclose a specific number of shares to be sold, nor does it include a target price for the offering, so it is impossible to calculate the value of the offering using the document.

Still, the price is likely to be steep.

All counted, Morningstar reports revenue of $139 million in 2003, up from $110 million in 2002 and $91 million in 2001. However, its most recent bottom line shows red. The fund tracker and data collector lost a net $11.9 million in 2003 compared with a small profit of $446,000 the year before. Morningstar explained that the loss was due to options related expenses in the filing. The Chicago-based firm is now one of the few to count stock options as an expense in its financials.

For founder Joe Mansueto, other insiders and investors, a successful IPO would represent a deferred dream realized. At one point in the late 1990s, Morningstar faced a liquidity crunch brought on by its quick growth. To raise capital, the firm brought in new investors with institutional experience and began a search for deeper pockets and Mansueto handed over his day-to-day duties to Don Phillips.

In 1999 it found those deep pockets at Softbank Japan, a firm that had then recently cashed in on an early stake in Yahoo. At the height of the Nasdaq bubble, Morningstar closed on a deal that brought it $91 million. The next step for all involved was the IPO. Former insiders at Morningstar told the MFWire in the spring of 2000 that the firm had signed on Goldman Sachs to lead an offering. Of course, the Nasdaq crashed and IPO flow dried up.

Now, four years later, the cast of investment bankers is different (Morgan Stanley is the lead underwriter along with Deutsche Bank Securities and William Blair & Co.) but the end result may be similar: Morningstar looks like it will finally finish what it started.  

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