The second big "ad-tech IPO" in as many months is upon us.
French retargeting firm Criteo is now expected to price its public offering tonight, a couple of days earlier than previously planned. And the deal's underwriters have bumped the target price from $23-$26 to $27-$29, suggesting strong demand in the wake of senior management's IPO road show.
Criteo aims to sell 7.2 million shares. With the new target price, that means it stands to raise $194 million to $208 million for capital expenditures and acquisitions. From a pure fundraising standpoint, the higher investor buzz means the company stands to grab $30 million to $60 million more than it thought likely last week.
The target price is very close to what Rocket Fuel targeted prior to its own public listing last month, but that doesn't mean CRTO's share price will spike more than 100%, as FUEL's did immediately after its IPO.
True, the financial picture portrayed in its F-1 filing shows a company with a striking compound annual growth rate of 100% since 2010. And a surprisingly large portion of its revenue (76%, excluding traffic acquisition costs) comes from clients with no budget cap – suggesting it's not as dependent on insertion orders as Rocket Fuel is.
However Criteo, like any ad network company (even if it is an "ad network 2.0"), is vulnerable to margin pressure.
"Gross margins have declined as the cost of inventory has risen," noted Richard Fetyko, SVP Internet tech and media at ABR Investment Strategy. "The margin compression came from EMEA, Criteo's core markets, vs. the Americas and APAC. The space is getting more competitive. That's the biggest worry I have."
In its IPO roadshow, Criteo has touched on some of the same buzz phrases Rocket Fuel hammered before going public, including "big data" and "computer science." And it has talked up its integration with its customers' CRM systems and how it can leverage granular product and customer data.
Criteo's underwriters include Jeffries, JP Morgan and Deutsche Bank.