Roku IPO Doesn’t Disappoint

28 Sep, 2017 By: Erik Gruenwedel

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Streaming media pioneer’s stock price closes up 68% on first day of trading

Roku’s Sept. 28 initial public offering (IPO) attracted myriad investors eager to get in on the ground floor of a company that helped co-invent the subscription streaming video market with Netflix 10 years ago.

Los Gatos, Calif.-based Roku’s projected $100 million investment ballooned to more than $220 million, making the company's value on paper around $1.3 billion. Company shares, which were valued at $14 per share prior to the IPO, closed at $23.50, with more than 39 million shares exchanged.

Notably, earlier this year Roku failed to generate more than $200 million from private investors — despite valuing the company at $1.5 billion.

But with the SVOD market a global phenomenon, underscored by Roku’s market share leadership, and high-profile competitors Google Chromecast, Amazon Fire TV and Apple TV, among others, investors jumped at the opportunity.

“What’s important in the evolution of the company is the platform business is becoming a greater and greater portion of Roku,” CFO Steven Louden told . “It’s now 80% of our gross profit and I think it’s great proof-point for investors about really what the Roku business model is about.”

Roku, which lost $24.2 million through the first six months of the fiscal year on revenue of $199.7 million, generates revenue through advertising, revenue-sharing agreements with content holders and subscriptions acquired through third-party SVOD services.

“[Licensing fees are] probably the place that has the most significant revenue recognition around it,” Louden said. “Our licensing fees — we have multiyear deals with TV brands as well as service operators through our Roku Power program. We actually have almost $70 million in deferred revenue on the balance sheet, which is a lot of value.”

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