Tag Archives: ReachLocal

Silver Lining

ReachLocal was lucky enough to choose for their opening day of trading a day when the Nasdaq tanked by over 4%. Despite an incredibly tough market and actually opening below their issue price of $13 per share, the stock ultimately closed at $14.98 which is up more than 15%. Good for ReachLocal! That means their advisers at JP Morgan and BAML came up with the right price. If the stock had skyrocketed, then management would feel like they left money on the table by not pricing it higher. Had it closed down or flat then you would question why they didn’t price it a little lower as long as they were going to price below the filing range anyway. As it stands, the stock did exactly what you’d like a stock to do in its first day of trading. Based on my assumptions from my first post, that has them trading just above 1.0x 2010E Revenue (if you assume they grow at their current 50% clip). So despite having to price below their filing range, they raised about $40 million if you assume total fees for the offering in the 7% range.

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$13 per share? What in the SMB happened?

One might expect OrangeSoda, a competitor, to derive a certain degree of schadenfreude from what has to be an exceedingly disappointing result for both ReachLocal and its investors. However, we are actually really dissappointed that the market had such a tepid reception for a good company in the sector. I did note in my earlier post that timing was questionable. But even though the book of orders for the stock didn’t come in strong, management and investors apparently felt like the benefits outweighed the costs of delaying or pulling the IPO.
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ReachLocal is set to price its long awaited IPO today after market close and begin trading tomorrow. Why it took so long between their initial filing and this week’s IPO is between them and their underwriters. Market conditions were much more favorable for new issuers earlier in the year and many recent IPOs have either traded below their offering price or offered below their filing range. Now after months of waiting and multiple amendments, it will be very interesting to see if they are able to price within their filing range and to see how the stock trades.

Regardless, it is great to see a company in the sector go public and we view this as another major milestone for the Local Online Marketing industry. Other recent milestones include Google’s reported offer of over $500 million for Yelp and the subsequent rejection of that offer and a decent volume of smaller acquisitions and investments by consolidators like Deluxe, AOL, IAC, and YPG/Canpages.
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