Updated: Criteo went public Wednesday morning at $31, and is now trading at $41.
On Monday we noted that Criteo’s underwriters had increased the target price for its upcoming IPO to $27-$29, exactly the range where Rocket Fuel debuted last month. Now comes word that the price has gone up again, this time to $31 — giving the company a market cap just shy of $2 billion.
At the new price, Criteo would raise $228 million — a lot of scratch for capital expenditures and potential acquisitions.
Also, despite our earlier report that the company’s stock could begin trading as early as Tuesday, the IPO’s underwriters have decided to stick to their original plan. That means the company will probably begin trading on Thursday, Oct. 31, under the NASDAQ ticker symbol CRTO.
The Halloween debut is fitting, as Criteo’s IPO is scary to some.
Observers, some of them anyway, worry that a ghoulish obsession with “programmatic technology” could fuel another ad-tech bubble — and that rather than follow The Shining example of Rocket Fuel’s IPO last month, the debut of CRTO could mark the start of a long Night of the Living Dead for ad-tech IPO aspirants.
Working in Criteo’s favor is that it continues to enjoy a Blob-like compound annual growth rate (100% since 2010) and strong demand for its Frankenstein’s monster of programmatic components (automation, real-time bidding, CRM integration and use of data and algorithms).
Valuation
The $31 IPO price gives Criteo a valuation of $1.96 billion (compared to to Rocket Fuel’s current $2.3 billion valuation). Criteo’s market cap is based on a lower multiple of consensus 2014 revenue (2.5x) relative to Rocket Fuel (5.7x), notes Richard Fetyko, SVP Internet tech and media at ABR Investment Strategy.
“Investors may hope Criteo’s valuation multiples will expand when it starts trading on Thursday closer to Rocket Fuel’s multiples, resulting in a similar first-day pop in share price that we witnessed with Rocket Fuel,” Fetyko said.
Criteo watchers should not necessarily assume the rising target price indicates explosive interest in the stock. Investment banks like to “keep some upside” in the stock by initially approaching investors with a lowball price. Better to underestimate demand and raise the range than the opposite, the thinking goes.
According to Fetyka, “Once a range is lowered, it often has the opposite effect. Instead of generating more demand, it scares more investors away, wondering what’s wrong with it. Bankers would prefer to cut the number of shares sold in such situations than cut the price range.”
