IPOs, Initial Public Offerings: pre & post IPO

Millennial Media Is Fully Priced After A 150% Increase

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Based on fundamental financial analysis Millenial’s (MM) IPO is fully priced at $25, which is a 150% increase of the price range mid-point earlier this week.

MM’s original price point mid-range was $10, it priced at $13 and today trades around $25, for a 150% increase from the original price range mid-point, see table below.

Mrkt Price / Price / Price / Price increase
Millennial Media Cap
($mm)
Sales Earnings BookValue over original mid-point
original mid-point, $10 $750 5.4 -18750 6.6
ipo price, $13 $975 7.0 -24375 8.6 30%
1st day price, $25 $1,875 13.4 -46875 16.4 150%

REVENUE GROWTH
Yes, MM as great top line revenue growth of 110% for 2011 compared to 2010, with a 37% increase in top line revenue for the December 2011 quarter versus the September quarter.

MARKET SHARE
Millennial Media has with a 16.7% market share, according to IDC. It’s second only to Google (GOOG) which has a 23.8% share, while Apple (AAPL) is third with a 15.1% share.

LIMITED ABILITY TO SET PRICES
Apple and Google are probably not running their mobile advertising businesses strictly as profit-making units, which puts MM at a disadvantage. In other words, AAPL and GOOG may cut mobile advertising rates in order to give their own ad space offerings a competitive advantage. MM doesn’t appear to have pricing power in the market.

CONSISTENT QUARTERLY EXPENSE PERCENTAGES
MM’s gross profit margin is only 39% and the expense ratios are fairly consistent. And for the past six quarters MM is essentially breakeven showing a slight loss. Therefore, it’s hard to see how the income statement can be leveraged to show significant profit, even with exploding revenue increases.

FINANCIALS
ratios based on the original price range mid-point

Millennial Media MM, C, 7.5 Post IPO shares: 75mm
Mobile adv platform Dec 31 fiscal
Baltimore, MD 2010 2010 2011 IPO Mkt
Revenues ($mm) $16 $48 $104 Cap
Gross profit % of revenue 29% 34% 39% $0
Pre-tax loss -$8 -$7 -$1 @$10
Pre-tax loss % of revenue -48% -15% -1%
Adj EBIDTA -$7 -$6 $2
Adj EBIDTA % of revenue -44% -13% 2%
Quarterly results Sept, ’10 Dec, ’10 March, ’11 June ’11 Sept ’11 Dec’11
Revenues ($mm) $11 $19 $22 $22 $25 $35
Revenue increase over prior qtr 73% 13% 4% 13% 37%
Gross profit % of revenue 36% 35% 37% 39% 39% 39%
Sales & Mkt % of rev 18% 13% 16% 16% 13% 12%
Tech & Dev % of rev 5% 3% 3% 5% 6% 5%
General & Admin % of rev 25% 27% 18% 21% 21% 21%
Pre-tax loss -$1.3 -$1.7 $0.0 -$0.6 -$0.2 -$0.1
Pre-tax loss % of revenue -12% -9% 0% -3% -1% 0%

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