CEO Club Folklore

An article by the Washington, DC, Lifetime Member and Founder of America Online, Jim Kimsey

It begins a few months before the Initial Public Offering (IPO) of America On-Line. While most of the members of the Washington, DC, CEO Club chapter couldn’t understand the business of AOL, Jim offered to let every Washington, DC, CEO Club’s member buy stock at the IPO as friends of the company.

At that time, little AOL only had 100,000 members and was a poor third to Prodigy and CompuServe. The benefit of being on the "friends of the company" list, was you didn’t have to pay a brokerage commission. The stock was scheduled to open at $11 a share and by coincidence 11 Club members agreed to buy AOL at the IPO price. Jim limited each person to a maximum of 2,000 shares in order to spread out AOL’s ownership.

He did ask each of us, however, to be gentlemen and ladies and not to flip the stock. He wanted us to hold it and not try to benefit from any unusual excitement from the IPO. Everyone agreed to the terms.

Now the story gets more interesting. The day of the IPO, which was handled out of Baltimore by Alex Brown and Company, the CEO Club also had its monthly meeting scheduled.

The luncheon speaker that day was Sydney Biddles Barrow, the Mayflower Madam. She was entertaining the Club with her life’s story.

Consequently, the night before she traveled to Washington, DC, and slept over to be ready for her talk the next day.

Because of the coincidental timing, the founder of the CEO Club, Joe Mancuso, invited Jim Kimsey to join him and the Mayflower Madam for a dinner. As the evening approached Joe realized that he was unnecessary in the dinner so he also invited CEO Club member John Spargo to join them to make it a foursome.

John was a good sport and did join the group. The get together of the foursome was very brief (for cocktails) and Joe and John soon split off to leave Jim and Sydney to dine and celebrate alone.

Joe and John had a nice dinner and got to bed early. John’s president of his company, Susan, was also at the dinner with Joe & John.

The next day at the CEO Club meeting, the Mayflower Madam was the second person to receive a standing ovation from the membership. The first congratulations came at 10:00 AM as AOL’s IPO. opened at $15 a share and was over- "subscribed."

It was an exciting day and everyone had fun and some of us made money. We like to say at the CEO Club, "it’s OK to have fun while you are making money."

About a month later, at the very next CEO Club meeting, Dr. Doug Strouse, who heads the Baltimore chapter of the CEO Club, asked the group assembled (Jim was not there) who still had their AOL stock, which was now at $16 a share. To his fond surprise, 10 of the eleven "friends" of the company, including Doug, had been guilty of flipping.

In other words, those ten CEOs made $4 a share or $8,000 in the blink of an eye. They owned the stock at $11 and were the benefactors of the $4 rise in price as the stock opened at $1500.

The reason this story has became popular folklore for the CEO Club is what happened to the chapter’s smartest member, John Spargo.

John is the CEO of an exhibition company called John Spargo and Associates but he has made more money in the stock market than most companies make in a lifetime. He has over 50 employees who work to assist associations at their conventions.

John was the one member who did not flip the stock. He was the only "gentleman."

Rather, he had the courage to hold his 2,000 shares at $11 and go into the market the next day and buy another 8,000 shares at $15. John is a very smart CEO and he is a legend in the Washington, DC, chapter.

If you are interested in these boring statistics, as of June 1, 1999, those same shares would be worth about $50,000,000. That’s a lot of money, even today!

John’s not complaining mind you, but he does say he feels he was @#%&ed by the Mayflower Madam. He says, "Hell, if she had not been along, Jim would have had dinner with Joe and me and I would have been better able to understand his business." "If I actually understood what AOL was doing, I would have bought at least twice as much stock." "I am still mad at the Mayflower Madam for @#$%ing me."

This is how CEO Club folklore spreads.

Now, if you would like a copy of the Mayflower Madam’s highly entertaining talk to the Club, just call us. It’s a fun tape that costs John Spargo $50 million plus!
 

The founder of America Online, James Kimsey, joined the not-for-profit CEO Club in the 1980s. He eventually became a lifetime member, along with AOL’s current Chairman, Steve Case, of the Washington D.C. chapter of the CEO Club. At that time, the company was called Quantum Computer Corporation. Eventually, Jim hired Steve Case and Steve became President and to a great extent has been the guiding force driving America On-Line’s success.
 

Did you know that Steve Case, a Harvard Business School graduate, was the brother of Dan Case, the president of the San Francisco-based investment banking firm of Hambrecht & Quist and that relationship helped Steve land this job?

If you’d like to hear more about Jim Kimsey, we have an audiocassette from the luncheon talk he gave to the Club on sale for $15. It’s a little jewel, but it’s not as good as the folklore, which has sprung up about the CEO Club most successful (but not richest) member.