AutoTrader: Dividends for us, not for you

June 18, 2012, 11:28 PM UTC

FORTUNE — AutoTrader today filed for a $300 million IPO, making it the first Internet company to submit an S-1 since Facebook went public last month.

Not too many financial details yet, except that prospective shareholders shouldn’t expect a dividend “for the foreseeable future.” AutoTrader blames its pending lack of generosity on creditor agreements that “significantly restrict” the Atlanta-based company from paying out dividends.

Seems reasonable, until you realize that AutoTrader hasn’t always been such a slave to its creditor agreements. Less than three months ago, the company actually amended its credit facilities to permit a $400 million dividend for existing shareholders Cox Enterprises, Providence Equity Partners and Kleiner Perkins Caufield & Byers. Moreover, the dividend didn’t come from earnings. Instead, the Atlanta-based company increased its long-term debt from around $884 million to nearly $1.3 billion.

In other words: Public shareholders will have to wait for possible dividends, all of which would come from company cash. Unclear just where the threshold is, since AutoTrader is a profitable company with more than $1 billion in annual revenue.

Private shareholders, on the other hand, already got a big payout by adding more debt onto the company’s balance sheet. No wonder certain public market investors have begun taking a much more skeptical look at private equity-backed IPOs…

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