Rosetta Stone IPO prices above estimate range
Rosetta Stone Inc
Rosetta Stone sold 6.25 million shares, raising $112.5 million, after shares priced above the estimated $15 to $17 range, the first IPO to do so since pumpmaker Colfax Corp's
Investors' embrace of Rosetta Stone stands in contrast to the reception given Tuesday to college operator Bridgepoint Education Inc
Analysts believed that Rosetta's success was due to a lack of publicly held competitors.
They have brand strength -- nothing compares to Rosetta Stone, everyone has seen their ads, said Ben Holmes, publisher of research and analytics firm Morningnotes.com.
The college space is becoming very competitive, but Rosetta Stone is in a very uncrowded space, Holmes said.
Rosetta Stone's chief rival, Berlitz, is privately held.
The relatively small size of the deal's float, or the number of shares sold, helped Rosetta Stone command a strong price, though analysts said the company could have raised far more money in the oversubscribed deal.
They left money on the table, but institutions and its retail clientele will remember that, and when Rosetta Stone comes back for a follow-on, they'll be amenable, said Scott Sweet, senior managing director of research firm IPO Boutique.
EFFECTIVE ADS
Rosetta Stone, which provides language instruction services to individuals, companies and schools primarily through CD-ROMs, has attracted attention through an advertising campaign that has featured U.S. Olympic swimming gold medal swimmer Michael Phelps.
Another ad shows a farmer wanting to learn Italian in an effort to woo a supermodel.
The Arlington, Virginia-based company offers language instruction products in 31 languages, with its beginners' French package, for example, selling for $259, according to its Website.
But Rosetta Stone has ramped up efforts to limit exposure to cash-strapped consumers by focusing on sales to corporations and the U.S. government. It plans to develop an Arabic learning product for the U.S. Army.
Rosetta Stone's main shareholders are ABS Capital Partners, whose shares prior to the IPO gave it 44 percent of votes and Norwest Equity Partners with a stake of 29 percent of votes, according to a regulatory filing. Following the IPO, those stakes will fall to 28 percent and 18 percent, respectively.
Half of the shares offered are being sold by selling stockholders.
In 2008, Rosetta Stone's revenue rose 52 percent to $209.4 million from 2007, with net income of $13.9 million, according to a regulatory filing.
The IPO's underwriters, led by Morgan Stanley
Rosetta Stone's IPO is the third in the United States in April, following Bridgepoint and Chinese video game maker Changyou.com Ltd
Rosetta Stone has been approved to list on the New York Stock Exchange under the symbol RST and is set to begin trading on Thursday.
(Reporting by Phil Wahba; Editing by Andre Grenon, Bernard Orr)
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