News CEO Gets His Spotlight, And Maybe First-Degree Burn

An extensive interview granted by Marc Benioff in the run-up to's planned IPO might have violated SEC laws.
SAN FRANCISCO (AP) -- Online software pioneer Inc. has indefinitely delayed its much-anticipated initial public offering of stock because the company's publicity-loving CEO allowed a reporter to shadow him for a recent profile.

By giving The New York Times access before the company priced its IPO, CEO Marc Benioff may have violated securities laws that muzzle management and other insiders before a company's stock is first sold to investors, according to documents filed Friday.

The so-called "quiet period" is designed to prevent a company from distributing any information that differs from the statements contained in an IPO prospectus.

The flamboyant Benioff tested the SEC's rules by cooperating with a May 9 article that touted as the hottest IPO this side of Google Inc., the renowned Internet search engine maker.

Ironically, the article contained observations from Benioff's colleagues wondering how the "gregarious chatterbox" would be able to weather the quiet period leading up to an IPO.

Benioff, 39, isn't quoted extensively in the article, written by technology reporter Gary Rivlin.

But the article pointed out that Benioff and Rivlin spent "hours of one-on-one time, much to the chagrin of the high-priced lawyers the company has hired to help (Benioff) negotiate the tricky byways of going public."

Benioff, 39, also posed for a picture that accompanied the story that ran on the front page of the Times' Sunday business section. Other media subsequently reprinted the article.

San Francisco-based halted its IPO on May 13 to create a "cooling off" period "so that the effect of (the Times) article and other reports ... would be dissipated," the company said.

If securities regulators decide broke any laws by cooperating with the Times article, the company could be required to buy back any of the shares sold in the IPO. The statute covers the period for up to a year after the date of violation. Salesforce plans to "contest vigorously" any allegations of misconduct, according to the filing.

Through a spokeswoman, Benioff declined to comment Friday, citing the quiet period.

The documents also disclosed that Benioff pocketed $16 million by selling 2 million shares of stock to an unidentified institutional investor just before the company filed its IPO prospectus in December. Benioff's sale price of $8 per share matches the price that is seeking for the 10 million shares to be sold in its IPO. The company hasn't established a timetable for completing the IPO.

Benioff remains's largest stockholder with 28.2 million shares--a $225 million stake if the company hits its targeted IPO price. has created a mostly positive buzz by allowing customers to subscribe to software applications available over the Internet. Most software companies charge a one-time license fee for software that's installed on individual computers. has 147,000 subscribers, helping the company earn $3.5 million on revenue of $96 million last year.

Although the company's formula appears successful, and Benioff clearly made a major mistake by cooperating with the article, said David Menlow, president of

"This is a case of unbridled excitement on Marc's part," said Menlow, who also was quoted in the Times article. "How can you let a CEO be interviewed during a quiet period?"

Editor's Choice
Samuel Greengard, Contributing Reporter
Cynthia Harvey, Freelance Journalist, InformationWeek
Carrie Pallardy, Contributing Reporter
John Edwards, Technology Journalist & Author
Astrid Gobardhan, Data Privacy Officer, VFS Global
Sara Peters, Editor-in-Chief, InformationWeek / Network Computing