YuMe Files for 65 million I.P.O

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YuMe has filed a S-1 with the SEC as it looks to go public and raise 65M in an initial public offering under the ticker symbol “YUME” on the NYSE. During May 2013 the company had 257 million monthly viewers, an impressive customer base of 64 of the top 100 advertisement firms in the U.S.

According to Magna Global, the global television advertising market was $202 billion in 2012. As internet television consumption continues to grow YuMe will be a great growth prospect in future years. In 2012 YuMe delivered over eight billion video advertising impressions across personal computers, smart phones, tablets, set-top boxes, game consoles, Internet-connected TVs and other devices. (YuMe also recently acquired crowd science, more information available on Crowd Science starting at F-45)

Revenue is fulfilled by delivering digital video advertisements through internet connected devices and some of the large “known” companies that are customers of YuMe are, American Express, AT&T, GlaxoSmithKline, Home Depot and McDonald’s.

The company is speculative yet fascinating as the industry (media) and sector (digital video advertising) are obviously gaining traction in the global market as advertising & marketing dollars continue to shift towards online viewers. For further evidence look at the recent success of video streaming service Netflix or the online advertisement titan, Google.

In 2012 YuMe revenue was 116.7M, or a 70% increase from 2011. While gross margins continued to expand from 38% to 46% and net income of 6.3M on an adjusted basis or a net loss of 11.1M on a non-adjusted basis.

The beneficial owners are planning to unload roughly 55% of the company on the open market, a large chunk coming from Ping Li (18.7%), David Weiden (19.6%), Khosla Ventures (19.6%), Accel Partners (18.7%) and DAG Ventures (12%).

Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Barclays Capital Inc. are the book running managers with Needham & Company, LLC and Piper Jaffray & Co lending a hand.

The company will be interesting to watch as it begins to trade publicly and convertible preferred’s as well as other warrants that will be able to be exercised come to fruition. Investor appetite may be strong as the fundamentals seem strong and poised for growth as well as the speculative prospect of being taken over by a larger media firm as the M&A theme continues in the industry.

Subscribers will be anxiously awaiting, in hopes of avoiding another Tremor I.P.O scenario.

I will not be buying into the I.P.O as it violates two of my investment rules, the first being the company must have at least 5 years of audited financial statements, the second being the company must not have a operating loss in the previous 5 year period.

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