March 5th, 2015
TubeMogul launched went public on the NASDAQ last Friday, raising $43.75 million for the company. The initial public offering (IPO) was originally scheduled for next year but a recent direct deal with Mondelez, one of the world’s largest food and beverage conglomerates, and some healthy Q1 quarterly earnings (up 130 percent, with 73 percent of revenue coming from self-serve clients) encouraged the company to strike while the iron was hot.
The price surged by up to 64 percent from the $7 starting price on Friday, but it’s important to look at the context for those numbers as the original list price was in the $11 to $13 range, which would have raised the company $93 million, more than double the amount raised last Friday.
Over on Forbes, Alex Konrad considered how some of the insiders may have felt about the jump in price:
Seeing that big of a positive jump in a stock on its first day of trading can sometimes be too much of a good thing. Bankers representing the listing company or its own executives got too skittish, perhaps, and left millions at the table by selling their first shares at dollars less than the market would have been willing to pay. A 20% or even 30% boost would look great, but more than 50%? That’s money that others are making trading the stock, not the company that put in the work.
For TubeMogul, you argue this one either way. The company only raised just under $44 million in its public offering, compared to the $94 million it originally planned to get at its original price range of $11 to $13. And despite the big boost, trading 54% up at $10.79, where the stock stood at 2:30 pm ET, is still less than the bottom of that range, so it’s hard to argue that the market would have boosted the stock much higher from a steeper initial price tag.
However, the first day of trading probably doesn’t tell us very much. It’s going to be more interesting to see if TubeMogul can maintain the early momentum over the coming months. Thus far, the various ad tech companies who have gone public have had a lukewarm reception from Wall Street and most have seen steady declines over the last year or so:
And this isn’t a problem unique to video ad tech companies either. Both The Rubicon Project and Rocket Fuel have seen similar declines:
However, the noises from TubeMogul investors were far more bullish, as the Wall Street Journal reported. Whereas VC funds typically take their money and run following an exit, the company’s longtime backers Trinity Ventures and Foundation Capital choose to invest even more in the company, with Trinity spending $5 million and Foundation spending $20 million to acquire shares and boost their holdings to 21% and 18%, respectively. Both believe the company is undervalued.
“It’s a value IPO. Otherwise I wouldn’t have invested,” Foundation Capital General Partner Ashu Garg said. “We’ve been with them since they were in the hundreds of thousands in revenue. This is long term.”