Case for Velti IPO – Prospectus

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Case for Velti


                   


  

Velti (NASDAQ:VELT) is a recent (January 28th 2011) dual listed IPO on the NASDAQ market, prior to its U.S listing Velti had been trading on the AIM exchange in London since 05/2006 and following on its offering in the U.S it has de-listed from the AIM exchange on April 28th 2011. The total offering size was 14.395 million shares (including over allotments) and was priced at $12. Post IPO VELT has 50.865 million shares outstanding giving it a market cap of $610 million at the time of offering.

From the prospectus:

'We are a leading global provider of mobile marketing and advertising technology that enable brands, advertising agencies, mobile operators and media companies to implement highly targeted, interactive and measurable campaigns by communicating with and engaging consumers via their mobile devices. '

VELT's platform also allows their clients to combine mobile media, together with traditional media, such as television, print, radio and outdoor advertising using single user interface.

VELT's clients include many of the largest worldwide mobile operators such as MTS, Orange, Vodafone and other campaign clients include Microsoft, Intel, Ford, Dell and Adidas.

VELTI has the ability to conduct campaigns in over 30 countries and reach more than 2.5 billion global consumers.

VELT's platform enables client to build mobile campaigns, track campaign performance, adjust and optimize campaign tactics, create mobile landing pages and micro sites, manage media buys, create mobile applications, build mobile CRM campaigns in real time.

Velti has positioned itself well in a strong sector that is set to grow impressively in the years to come, per ABI research worldwide mobile marketing and advertising spending is expected to increase from $1.64 billion in 2007 to nearly $29.0 billion in 2014. According to eMarketer the U.S mobile advertising spending projections are $320 million in 2008 to %1.56 billion in 2013. With the explosion of smart phones and faster delivery technologies like 4G mobile devices are focused to see increased ad spending.

Majority of the revenue for VELT comes from Europe and U.S, Velt has two joint ventures in India and China two fastest growing mobile markets which are larger than Europe and U.S. Recently Velti announced to fully acquired the part of China joint venture it does not already own.

Competition:

Sensing the mobile ad space strength Google acquired AdMob, Apple acquired Quattro and Motricity acquired Adenyo and apart from the above public companies private competitors include Millennial Media (planning to go public later this year) and German based YOC group which is a public company on the Xetra mkt, with the mobile ad market growing at a solid pace there is plenty of room for growth for the players.

Financials:

Seasonal indeed and Velti notes holiday spending and client ad budgets closures at the end of calendar year make nov-dec quarter the strongest on a annual basis.

Revenues for 2009 were $90.0 million and revenues for 2010 were 116.3 million and 1st qtr revenues were $29.6 million and the projected revenues for 2011 are at $174 million a strong 50% increase from 2010 revenues, projected 2012 revenues stand at $248 million a solid 42% increase from projected 2011 revenues. Earnings of .39 in 2011 and .65 in 2012 at close of today's pricing is trading at 24 times 2012 estimates.

Update on VELT secondary offering:

Company announced earlier today(245th May 2011) that they are planning to offer 8million shares by the company and 1.831 million shares by selling share holders and pursuant to this offering outstanding number of shares set to increase to 58.881 million. Velti also granted underwriters an option t o purchase 1.474 million shares to cover over allotments. Velti essentially is diluting roughly 16% to set it self for paying long term debt of $22 million, to cover 2010 acquisition cost of Mobclix to fund a $17.3 million payment and up to $5 million of contingent payments and to fund up to $16.5 million that is to be payable on completion of proposed acquisition of the remaining equity interests in CASEE (China JV).

Closing:

I like the growth of the markets company serves and like the fact that VELT is a pure play on mobile ad marketing and spending. The secondary announcement will create an opportunity to scale in to the trade and 14.5 is an area that interests me to take a position. I feel the sector is in its initial years of growth and VELT is in a spot to capitalize on the same.

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