IPO Report: RetailMeNot (SALE)

Francis Gaskins |

RetailMeNot ($SALE) is in the digital coupon business, where there are no barriers to entry.  Based in Austin, TX,  SALE scheduled a $191 million IPO with a market capitalization of $1 billion at a price range mid-point of $21, for Friday, June 19, 2013.

Six other IPOs were scheduled for the week of July 15. The full IPO calendar can be found at IPOpremium.

  • S-1 filed July 8, 2013
  • Manager, Joint Managers:  Morgan Stanley; Goldman Sachs; Credit Suisse
  • Co-Managers: Jefferies; RBC Capital Markets; Stifel; Blair
    Note:  same lead managers as Facebook (FB)

Summary
 
Digital coupon competitors include Groupon (GRPN) , LivingSocial, OpenTable (OPEN) ad many others.

SALE’s revenue growth was flat, comparing Q2’ 13 with Q1’ 13:  that’s a very bad sign.

Even worse, profit declined 39%, comparing Q2’ 13 with Q1’ 13

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Q1 ’13



Cap (mm)

Sls

Erngs

BkVlue

TanBV

in IPO

RetailMeNot

$1,054

6.4

37.6

3.1

8.1

18%

Glossary

Conclusion
Ok for a trade, even though
sequential quarterly revenue growth is zero, and profit declined 39% in Q2 vs Q1.  To put the above conclusions and observations in context, the following is reorganized, edited, and summarized from the full S-1 referenced earlier:

Competition

There are no significant barriers to entry in the digital coupon space.

Post-IPO Voting Power

Entities affiliated with Adams Street Partners, 5.1%
Entities affiliated with Austin Ventures, 25.4%
Google Ventures 2011, L.P., 4.1%
Institutional Venture Partners XIII, L.P., 6.3%
Entities affiliated with J.P. Morgan, 12.5%
King Holdings (Vic) Pty Ltd , 5.2%
Entities affiliated with Norwest Venture Partners, 16.3%

Use of Proceeds

Half of the stock being sold is by VC’s and insiders:  that’s a red flag.  SALE itself expects to net $85.5 million from its IPO.

$52.5 million of SALE’s IPO proceeds will be used to pay accumulated and unpaid dividends: that’s also a red flag.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FB Facebook Inc. 133.21 -0.32 -0.24 9,152,864
SALE RetailMeNot Inc. 9.20 0.15 1.66 246,868
GRPN Groupon Inc. 4.70 0.04 0.86 9,750,392
GPGD Grand Pacaraima Gold Corp n/a n/a n/a 0

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