If you're a smart grid watcher, you've no doubt been waiting with bated breath to hear news on the most-watched potential IPO candidate in the industry: Silver Spring Networks. It's been a year and a half since the Redwood City, Calif.-based startup filed its initial S-1 and announced plans to go public. But since then, while the company has lined up new investors, new partners and new customers, it has remained quiet on when -- or whether -- it's going to eventually pull the IPO trigger.

That leaves a lot of room for speculation about the company's prospects for an exit. But when it comes to Silver Spring's financials, its quarterly-updated S-1 amendments are pretty straightforward -- which makes a recent analyst note claiming proof that the "lights are out" for Silver Spring's IPO quite frustrating to read for what it appears to get wrong.

PrivCo's Tuesday note does get some facts right. It reports that Silver Spring's $146.7 million in revenues for the first nine months of 2012 is down from the $175.7 million in the same period in 2011. (Silver Spring reported 2011 revenues of $237 million, 2010 revenues of $70.2 million and 2009 revenues of $3.3 million.) It also states, correctly, that the company has yet to turn a profit.  

But on a key point, PrivCo appears to get the facts almost exactly backwards. That's the issue of "deferred revenue," or as the PrivCo note calls it, "unrecognized revenue." That's the money that Silver Spring has "billed the customer for product shipped or services performed," but for which "all revenue recognition criteria have not yet been met."

PrivCo's note chose to interpret this category as "cash received in advance for goods and services it must deliver in the near future." That allows Privco to claim that the figure of $472.5 million, compared to Silver Spring's available cash of $59.6 million as of Sept. 30, constitutes "technical insolvency."

Why "Technical Insolvency" Is Wrong

Silver Spring's deferred revenue figures have grown, from $210.2 million at the end of 2009 to $400 million at the end of 2010, to stand at $472.5 million as of Sept. 30, 2012. But Silver Spring's S-1 shows (on page 15, if you're interested) that it has also grown its billings, or the amounts invoiced for products (and services) that had been delivered in that period, "and for which payment is expected to be made in accordance with normal payment terms," from $183.3 million in the first nine months of 2011 to $218.8 million in the first nine months of last year.

In short, PrivCo has taken a figure that stands for revenue that's bound to be collected, but is not yet accountable for under GAAP standards, and calls it money Silver Spring has already received but has yet to deliver on. Unless I'm missing something, that's just not right.

The note also doesn't mention that Silver Spring has consistently reduced its losses in strict terms as well as on a per-share basis; that it has 13 million smart meters networked and another 11 million or so under contract; or that it has a backlog of $745 million in products and services.

Silver Spring has issued a condemnation of PrivCo's analysis as factually incorrect, and one company executive told me that he couldn't imagine that it wasn't a malicious attack, given that the error at the heart of its "technical insolvency" claim appears so basic.

It's important to note that PrivCo CEO Sam Hamadeh has earned a reputation as a media-hungry provocateur, ever since he got on The Today Show by questioning Mark Zuckerberg's stature as Facebook CEO -- though he had also called out the poor performance of Facebook and Zynga's stock before their much-hyped IPOs.

To IPO, Or Not to IPO

All of this fact-checking aside, there still remains a fundamental question about when Silver Spring will either hold its long-awaited IPO or pull its offer and seek alternatives. Of course, in the smart grid space to date, the alternative has been acquisition by a bigger contender.

GigaOm responded to the PrivCo note on Wednesday with a report citing anonymous sources saying that Silver Spring was going to hold its IPO as soon as the next four weeks. I wasn't able to get any corroboration of that timeline from Silver Spring, which has consistently stayed mum on everything related to its IPO plans.

Silver Spring hasn't stopped updating its S-1, and it recently announced that key VC backer Foundation Capital has agreed to buy $12 million in Silver Spring shares at its IPO price if it finally does go public. That's a move akin to SolarCity backers Elon Musk, DFJ and DBL Investors pledging to buy up a big share of the company's stock the day before its December IPO.

Of course, SolarCity's IPO was also a touch-and-go affair, with the company forced to slash its opening share price target from $13 to $15 to $10, and then to $8, before picking up a 50-percent gain on its first day of trading. (SolarCity shares closed at $14.58 on Wednesday.) The same market conditions that have battered SolarCity, a standout in the fast-growing third-party solar aggregator space, have also punished most of the publicly traded "green" technology stocks out there, and have pushed several others to postpone their IPOs.

It's hard to predict just how Silver Spring will choose to manage its IPO aspirations in the months to come, with so many external factors weighing in on its decision. Sources have told us that the company had been planning a road show for investors this fall, only to postpone it. At the same time, speculation over a potential acquisition is in the air. It does seem likely that 2013 will see Silver Spring forced to make a decision -- to IPO, or to seek the alternative of being bought. A company can only stand on the edge of the pool for so long.

Tags: foundation capital, insolvency, investors, ipo, markets, privco, s-1, silver spring networks, smart meters, solarcity