Roku prices IPO at $14, valuing company at $1.3 billion

Posted September 29, 2017

Shares of Roku rose in their first morning on the market, as the entertainment technology company made its public debut on Thursday.

Roku is expecting to price its IPO in the $12 to $14 range and raise roughly $220 million. It offers more than 3,000 channels.

Roku is best know for selling low-priced boxes that allow consumers to stream Netflix, YouTube and other streaming video services to their televisions.

"We depend on a small number of content publishers for a majority of our streaming hours, and if we fail to monetize these relationships, directly or indirectly, our business could be harmed", the company said in the filing. Roku does make money by sharing advertising revenue with some of the apps it carries.

One thing long-term investors will want to watch closely is Roku's transition from hardware-generated revenue to subscription revenue.

How much is the dollar? (September 27 prices)
Shortly after the opening bell, the Dow Jones Industrial Average rose 62.10 points, or 0.28 percent, to 22,346.42. In Europe, the Stoxx 600 Index was 0.3 percent higher at 5:50 a.m., with S&P 500 futures gaining 0.1 percent.

Roku is selling 9 million new shares, and existing shareholders are offering 6.7 million.

Snap, Inc., the biggest tech company to have an initial public offering in 2017, has seen its shares slashed nearly in half in value as investors realized that Instagram could use its huge amount of resources, with Facebook being its parent, to simply copy the features on Snapchat. This includes ad sales on advertising-supported channels, but also licensing fees, fees for placement in the Roku channel store and more.

Roku earlier this month broke the news of its IPO in an SEC filing detailing the process. Although it lacks the deep pockets of competitors such as Apple and Amazon, Roku has received financial backing from a bevy of media conglomerates including 21st Century Fox, Viacom and the Britain's Sky. Menlo Ventures was the largest stakeholder prior to the IPO, owning 35.3 percent of the company. And in the first six months of this year, revenues were $199.7 million, representing a 23% jump from the year-ago period. The company lost $24.2 million in the first half of 2017. Where Google, Amazon, and Apple are blocking rival services and products-Google recently pulled its YouTube video Service from Amazon's Echo Show device, and Netflix was not initially included in one of Apple's TV apps-Roku offers its users a wide range of streaming options.

"There's too much money chasing too few good ideas", Smith said.