Rosetta Stone: Pricing the 2009 Ipo Essay examples
5283 WordsMar 27th, 201422 Pages
UNIVERSITY OF OREGON INVESTMENT GROUP
4-30-2010 Consumer Goods
Rosetta Stone Inc.
Stock Data Price (52 weeks) Symbol/Exchange Beta Shares Outstanding Average daily volume (3 month average) Current market cap(M) Current Price Valuation (per share) DCF Analysis Comparables Analysis Current Price Target Price Summary Financials 2009A ($M) Revenue Net Income Operating Cash Flow $252 $13.4 $41.1 $16.06- 32.97 RST / NYSE .65 19.9 287,505 $569 $26.25 $31.88 (50% weight) $37.10 (50%) $26.25 $34.49
CORPORATE SUMMARY Rosetta Stone Inc. (RST) joined the public markets in the spring of 2009. As of the end of their fiscal year 2009 they reported $252 million in sales, while also growing profits at 54 percent year over…show more content…
The personal edition is for those who are looking to pick up a language on their own time and convenience. These normally appear for purchases at kiosks, retailer stores and or online to be used in the home. Schools that are looking for assistance with teaching their curriculum can purchase the classroom edition. For those who are teaching the language can use the tools offered in this edition to create track record for students as well as helpful activities, guidance to enhance the process, and detailed lesson plans. Families who use their home as a means for education are offered a targeted course that enhances lesson planning. Parents can create a formal language learning environment with ease. The Home School Edition provides similar functionalities as the classroom. Corporations who are need of language support for international activities can supply their employees with a convenient, user friendly platform that gives them total control of their learning experience.
The latest data in the 10k shows that 87 percent of their sales were CD-ROM based purchases while the remaining 13 percent came from online subscriptions. The chart above shows the recent growth by the company, both domestically and internationally. This trend is set to continue for the next 3-4 years as expansion efforts and global demand pick up. BUSINESS AND GROWTH STRATEGIES RST has been able
Rosetta Stone Case Study Essay
738 WordsNov 7th, 20133 Pages
Case #3: Rosetta Stone
1. By going public Rosetta Stone would be able to obtain the capital required to expand the business and enter new markets. Another advantage of going public is the ability for Rosetta Stone to increase its brand’s image, awareness, and reputation. An IPO could be a good move because of the increased globalization occurring that has led to more and more people learning needing or wanting to learn different languages. Going public as the economy is just coming out of its recession could prove to be advantageous for Rosetta Stone. The case gave the example of Changyou.com going public at six and a half times its EBITDA. It also mentioned that the CEO of Rosetta Stone had concerns about being taken over if they stayed…show more content…
Finally they could form strategic alliances with other companies in the industry.
3. If I were part of the underwriting syndicate I would recommend a price of $21 for the offering. While the underwriters have given a range of $15-17 per share, I believe that Rosetta Stone will follow suit with the two other companies that went public during the year and experience a large price jump on the first day of trading. A higher initial offering will make it look better for the underwriters, so they are not accused of severely underpricing the shares.
4. The article said that K12 was the closest comparable company to Rosetta Stone. Rosetta Stone is marketable to a larger consumer base than K12, so I think that it should be able to charge a higher IPO. The case said that book was more than 25 times oversubscribed during its road show which means Rosetta Stone could charge a much higher price. But these subscriptions are volatile and the economy is recovering, so a price too high could deter many investors. For my analysis I took the EBITDA margin for years 2006-2008 and found the average increase during that time to be 9.93%. I then took the estimated share value from 2008 and multiplied it by 1.0993 to factor in the average increase in share value. This resulted in a price of $19.22. Given this number I would increase the current range from $15-17 to $19-24. The reason for the increased range is because of the