This story was updated at 3:59 p.m. on July 18, 2014
Video demand-side platform TubeMogul rang the bell at the NASDAQ Friday morning to announce its long-awaited IPO. Traders greeted NASDAQ:TUBE with enthusiasm, but only after the company significantly slashed its valuation in the run-up to the offering.
TubeMogul sold out its 6.25 million shares to bring in a total $43.8 million. Although its early target was much more ambitious at $81.3 million, the company updated its IPO filing Thursday morning with a significant markdown, from $11-13 per share to $7-8. That brought the company’s valuation down from $394 million to $244 million.
Trading opened this morning above the IPO price at $9, and has since grown to more than $10.
“I’m ecstatic,” TubeMogul CEO and founder Brett Wilson told Marketing. “It means that TubeMogul is going to be an independent, standalone, healthy and enduring company.”
He said that being public will help TubeMogul focus on its brand clients, whereas being bought out by a big tech company would have made its clients’ objectives secondary to a larger agenda.
“Brands use our software to manage all facets of our campaigns, and it’s important to them that we remain independent and advertising-facing, and never have any incentives other than that which is best for them,” he said.
TubeMogul performed decidedly better on IPO day than video networks Tremor Video and YuMe which went public in June and August last year, respectively. Both companies initially priced higher than TubeMogul, but saw prices fall on IPO day. It’s worth noting that while Tremor, YuMe and TubeMogul are all in the programmatic video category, YuMe and Tremor provide services primarily to publishers, while TubeMogul serves advertisers and agencies.
Traders have had lukewarm feelings towards public ad tech companies of late. Stocks of celebrated companies like Rocket Fuel, Millennial Media and Rubicon have been trading below their IPO prices (after seeing early pops similar to TubeMogul’s). The one arguable exception is European retargeting platform Criteo, which IPOed last fall at $31 per share and is currently trading above its opening price, after a Q2 surge in investor confidence.
In an interview with The Wall Street Journal, ad tech analyst Brian Wieser (who is also a Marketing columnist) said that one reason for the downturn has been the complexity of ad tech companies’ business models. “It’s difficult to explain to most investors what ad tech business models are, let alone how rapidly they’re changing and what differentiates one company from another,” he said.
That complexity makes it difficult for investors to separate out smart investments, and small market caps mean they’re not usually worth the risk. “Babies will get thrown out with bathwater here,” he added. “Investors need to spend time distinguishing the good from the bad.”
“It was a challenging fundraising environment,” Wilson said. “There was a backdrop of ad companies that didn’t do what they told investors they were going to do. That being said, I think the fact that we got up shows that investors saw the differentiation in our approach. Whereas a lot of other companies in the space are primarily risk/arbitrage networks, we build software, and work with brands to consolidate all of their spend through our software.”
More than half of TubeMogul’s shares were bought by two insider investors, Trinity Ventures and Foundation Capital. According to TubeMogul’s updated S-1 documents, Trinity purchased $5 million in stock, while Foundation bought $20 million, making up 53% of the offering.
Somewhat unusually, the insiders did not re-sell their stock – suggesting they see long-term potential for the company. “You don’t see that every day,” Wilson said, noting he bought 15,000 shares himself.