Your Cheat Sheet to the Hot Slate of Upcoming IPOs
Earlier today, Nielsen Corp., a company best known for their TV ratings, announced that it intends to raise $2.01 billion in an IPO slotted for this fall. Previously the company had sought $1.75 billion. This increased price tag reflects what is shaping up as an optimistic and enthusiastic slate of upcoming IPOs. Along with Nielsen, are the highly anticipated IPOs of General Motors, Skype, Demand Media and Hulu.
During this past quarter, we saw two buzz-worthy IPOs in the technology and automobile sector with shares of RealD (NYSE: RLD) and Tesla (NASDAQ: TSLA) hitting US Equity markets. Let’s take an early sneak peak at the newest slate of IPOs set to hit markets during the remainder of 2010.
Shares of GM are set to make their grand return to US equity markets, as the company is expected to file for an initial public offering this coming Tuesday. This comes a year and three months after they filed for an organized bankruptcy that placed the majority of the company’s ownership in the hands of the US Government. Since the bankruptcy, the company has trimmed down its work force, closed several plants and dealerships, and divested of non-core enterprises.
During the first quarter of 2010, the rejuvenated GM reported earnings of $865 million. In doing so, the company returned to profitability far sooner than many anticipated. GM used this momentum in order to gear up for this upcoming relaunch. Some chatter put the IPO value at as high as $70 billion, targeting a total offer value ahead of previous record-holder for a capital raise in Visa (NYSE: V), which brought in $19 billion in 2008. The $70 billion offering would have allowed the US government to completely divest of its stake in the car-maker. However, in recent days it appears more likely that GM will sell somewhere around 20% of the ownership interest, for a total of approximately $16 billion in proceeds.
Hulu indicated that the company will seek to raise $2 billion in an IPO preparing to hit markets before year end. The company, founded as a joint endeavor between NBC and FOX, offers web-based viewers a variety of streaming options that range from free to subscription content. Hulu CEO, Jason Kilar, recently indicated that they earned over $100 million in the past year on their way to generating positive earnings. The IPO is just one step on the path for Hulu’s attempt at monetizing on its rapidly expanding viewership by offering subscription and fee-based services to a wider slate of content.
Hulu’s expected offering comes on the heals of Netflix (NASDAQ: NFLX) stock’s wildly successful run on account of the company’s successful and rapid transition from the dvd-by-mail to the higher margin streaming and faster growing business (read here for my take on why Netflix is no Crocs and to gain more insight on the latest trend in online streaming). An IPO would help Hulu raise the capital necessary to compete in what has become a capital-intensive process to build out the streaming infrastructure necessary for profitability. Recently, Netflix signed a deal which requires the company to pay $1 billion to a Epix for the streaming rights to films by Paramount, Lions Gate and MGM.
Speak of the devil. I literally just hung up my conference call on Skype. Skype offers users the ability to sign into their software platform and connect directly to users via voice, video and/or text. Last week the company filed for an IPO seeking to raise up to $100 million. Many Generation Y-ers now forgo a land line (land line, what’s that?) altogether in favor of the combination of a cell phone and Skype. The rapid improvement in Internet connectivity speed and the expansion of wireless technology has made Skype a versatile tool for anyone with access to the Internet.
In addition to direct connectivity via Skype, the platform offers users the opportunity to buy minutes, or even subscribe monthly for access to direct dialing. With the rapidly expanding Apps market on iPhones and Google Android-backed phones, subscribers can now also access Skype’s benefits on the go through their 3g and 4g network connections. Much like with Netflix and streaming, the transition into the mobile world greatly enhances the opportunities present to this already growing phenomenon. With the liberation of Skype’s power from the computer to the mobile world, Skype’s capacities increase in power, utility and impact.
In 2006, at the height of the private equity boom, a consortium of six firms bought Nielsen for $10 billion. This is one of the more significant IPOs filed by the private equity industry in its effort to divest and recapitalize on their acquisitions in the bubble days of cheap and easy credit with high asset values. As I mentioned above, the company recently increased their targeted capital raise from $1.7 billion to $2.01 billion. This reflects the improving nature of the IPO market.
Nielsen is best known for their highly respected ratings system of TV program viewership. The company’s proprietary ratings continue to be the most important and respected system for determining a TV channel’s and an individual show’s viewership, in order to gauge advertising values. For the second quarter, the company generated revenues of $1.27 billion and income of $182 million.
Demand Media is the leading search engine optimization (SEO) company on the web today. They are both a content provider and a domain name registrar. The company generates content by following the latest trends in search and then posts that content on a variety of sites including YouTube and a slew of Demand Media owned domains. In its recent filing, Demand Media indicated that it will seek to raise $125 million in its initial public offering, that would value the company at approximately $1.5 billion.
Demand Media was started by Richard Rosenblatt, the former chairman of MySpace, and Shawn Colo, a prominent private equity investor. Since its inception in 2006, the company has quickly built a new-age model to content generation and distribution that capitalizes on the mechanisms behind how the Internet and search work. The company provides the infrastructure through which a growing number of talented writers can best be matched with an expanding base of online content providers (check out Business Insider’s take on Everything You Need to Know about the Demand Media IPO).
Disclosure: No relevant positions.