In fact, Demand Media is expected to price its deal on Jan. 25, a source says. The company will likely go public the day after.
Santa Monica, Calif.-based Demand Media laid out terms for its IPO Wednesday. The company expects to offer 7.5 million shares at $14 to $16 each via bookrunners Goldman Sachs and Morgan Stanley, according to a Jan. 12 regulatory filing. Other underwriters on the deal include UBS, Allen & Co., Jefferies, Stifel Nicolaus Weisel, RBC Capital Markets and Pacific Crest Securities. Demand Media plans to trade under the ticker “DMD.”
Demand Media itself is selling 4.5 million shares and shareholders are offering another 3 million. Underwriters on the deal have the option to buy another 675,000 from Demand Media and 450,000 shares from selling stockholders, the filing said.
Demand Media actually filed for its IPO back in August but the deal had been stalled due to accounting issues. The company doesn’t expense the cost of paying its writers upfront but instead amortizes expenses over five years. The SEC was reportedly scrutinizing Demand Media’s accounting treatment and sources told me earlier this month that they didn’t expect Demand Media to get approval for its IPO. They were wrong!
One banker, who was not a fan of Demand Media’s business, even thinks it could surpass expectations. “With so much demand for companies like Facebook and Zynga, [Demand Media] might end up doing surprisingly well,” the source says.
Demand Media is backed by PE. Oak Investment Partners owns about 22.7 million shares, or 29%, before the IPO but isn’t selling stock. After the IPO, its holding will fall to around 27% assuming underwriters exercise the greenshoe. Spectrum Equity is selling 819,543 shares. The firm’s stake will fall to 14.5 million shares, or 17.41%, from 19.76%.
Goldman Sachs also owns a stake in Demand Media but isn’t selling shares. Goldman owns 6.2 million shares before the offering and its stake will fall to 7.49% after the IPO (if the greenshoe is exercised).