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Roku Rocks Wall St. with IPO; closes with 67% rise

Roku Rocks Wall St. with IPO; closes with 67% rise

(FinancialPress) —Video streaming service pioneer Roku (Nasdaq: ROKU.O) received a warm welcome to the stock market, with shares rising over 67% in their first day of trading.

Roku closed the Nasdaq session with a $23.50 price tag, thus reaching a market capitalization of approximately $2.23 billion.

The performance reinvigorated the sluggish U.S. IPO market. The offering began at $14, with 15.67 million Class A shares being available for trade.

Despite the fact that it‘s raised more capital this far into the year than it did in all of 2016, the IPO market has slowed down significantly towards the last lap of the year.

Roku was one of the first companies to provide customers with an option to move away from cable service, with its online streaming content device: the Roku DVP. Since it has evolved and adapted until reaching its current gamut of products, classified as a whole as various “Roku boxes“.

As a means to retain competitiveness, the company opened its platform to more TV apps than its peers – which allows it to offer more than 3,000 channels worldwide.

With the gargantuan opposition presented by devices released by Apple Inc (AAPL.O), Alphabet‘s (GOOGL.O) Google, Amazon (AMZN.O) and more companies that delved devotedly into its market, Roku had to find a way to remain afloat – but in the end, more than surviving, it managed to soar.

Moving away from direct retail sales, Roku now licenses its software to companies such as Hitachi and Sharp – including its platform as part of their smart TV sales. The revenue model nets them a fraction of the advertising revenue sold to media companies and also part of proceeds from new signups to apps performed through their platform.

Anthony Wood, CEO of Roku, said that the company plans to keep riding the wave, as TV content continues to move away from traditional cable in favor of online platforms.

“When we sign up a customer to a subscription service or Hulu or Netflix, we get a revenue share as well.“

 

Anthony Wood – CEO, Roku.

A June SEC filing shows that the company reported 15.1 million active accounts and 6.74 billion hours of streamed content by the first semester of the year.

While impressive, profitability is still the company‘s white whale. Roku finds itself pumping back truckloads of its hard-earned cash into marketing and R&D. The same SEC reported a loss of $15.5 million by June, up from last year‘s $14.1 million loss reported by the same time of the year.

But getting out of the red is a white whale to most tech companies, as Brian Hamilton, founder of data firm Sageworks, explains:

“I don’t like that they are losing cash, but if you wait for a cash flow positive tech company, you may have to wait for a full solar eclipse to come around again.“

 

 

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