Followers of adtech stocks will have their fingers crossed for YuMe, a video ad network whose IPO opens today on U.S. stock markets.
Adtech stocks have disappointed investors recently. Tremor Video, for instance, priced its stock at between $US10 and $US11, but it languishes around $US8 today.
There are reasons to suggest that YuMe may also disappoint.
First, the basics: Yume is pricing its stock at $US12-$US14, and hopes to raise ~$US65 million from the sale.
Observers will be cheered by YuMe’s financial statements: The company has a bouyant income statement, with robust revenue growth. It has dipped in and out of profitability, indicating that it is plowing its revenues back into the company to make it grow. Its balance sheet shows $US26 million in cash. Here’s a snapshot:
So what’s the problem?
Look at the expected dilution from existing shareholders:
80-four per cent of the company is owned by insiders who got their stock at $US3 and change. If the stock stays anywhere near $US13, they will all want to sell as soon their lockup schedules allow.
That’s likely to depress the price once the stock floats. We’re not IPO experts, of course. Investors may see the revenue growth and the underlying video ad sector — where ad prices can often be much higher than web display advertising — as much more interesting than the dilution.
Citigroup and Deutsche Bank are leading the deal.
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