ipo maximize your offering price
TRANSCRIPT
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IPO -Maximize Your Offering Price
Disclaimer
This is not legal or investment advice of any kind
Seek competent advice from qualified attorneys and investment bankers
Your situation may vary
The more you know about finance and business, the more you can profit
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This will show you how IPOs are valued
Knowing how Wall Street underwriters look at IPO pricing is key to positioning your company to maximize valuation and minimize dilution
There is nothing Wall Street
loves more than growth.
I am going to reveal here an evaluation of some initial
public offerings we prepared on November 27,
2011.
This is a preliminary analysis of these IPOs, completed and
planned, that we prepared for a client company that was
considering going public.
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When you attack the market with these kinds of quantitative tools, you find that the mystery falls away and you can see clearly
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Your underwriter will prepare studies like this to show at what valuation he can use to market
your stock in your IPO
November 2011
Company Valuation (millions)\
Forward P/E
Price/Sales Uniques (millions)
Angie's List 413 N/A 5.4 1 (all paid)
Friend-finder
40 1.19 0.12 484
Groupon 16,700 187 12.24 183
Linkedin 6,940 248 6.56 135
Pandora 2,080 N/A 9.72 90
Zynga 15,000 152
Company Revenues (millions)
Revenue Growth %
Value per User
Revenue per User
Angie's List 78.7 48 413 (all paid)
8.7 (all paid)
Friend-finder
338 -5 0.08 0.7
Groupon 1,118 (nine months)
699 116.78 7.82
Linkedin 354(nine months)
120 51.41 2.62
Pandora 103 23.11 2.26
It is important to note the metrics
we used. We used revenues,
revenue per user and revenue
growth.
These metrics
were mentioned
in public discussions about these companies.
Now here is a discussion of each company
As you can see, they all have their own
unique characteristics that have to be taken
into consideration in evaluating the
whole group.
Angie's List is unique in that all of its members pay. The service is to provide customer written reviews of local services.
All of their subscribers pay cash money, so the revenue per user is high and
the value per user also is high.
Friendfinder is an online dating
service. Their IPO crashed and they
are being sued. We can discount their
numbers as an outlier in the data.
Note the low
value per user,
low revenue per user and lack of
growth
Groupon had shown the most growth of any
of the list
If you look at the value per user column, and
compare it with the rest, you can see the premium the market put on
growth.
Linkedin, with less growth than Groupon, was being valued
well
Investors perceived that
Linkedin's users are locked in,
unlike Groupon
Note that Zynga has a strong value per user
This is interesting as there were
doubts about its ability to keep momentum a fad business
Summing it all up, what can we
learn here?
To me, revenue growth jumps out as a key driver of
growth.
Groupon, LinkedIn and Zynga all had
strong revenue growth coupled
with strong revenue per user
The more you look at this, the more you understand
that growth drove their value
We know now that Groupon and
Zynga failed to continue their
growth, and as a result, their
stocks crashed
From this chart, we can deduce several things
First, while the market valued
revenues, it discounted profits
almost entirely
To me, revenue growth jumps out as a key driver of
growth
Growth of revenues is the
key metric
Therefore, you should focus on
growth, customer lock in and
having a unique service
This is only a beginning –
We can show you how to maximize the value of your
stock offering
This will increase the amount you
raise and minimize the
cost of dilution in your IPO
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Questions – email me at John.Lux@ Securities-Law.info
(240) 200-4529
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