OpenTable IPO Math Doesn't Add Up

We have been doing some background research on OpenTable in preparation for a pre-IPO report which we often do for technology and related issues. (This time we even have a full interactive model behind the analysis from a new research partner that we think will further enhance the interest we get.)

Oddly enough we were just getting started when we ran into the proverbial elephant in the room. Is the fully-diluted share count on this puppy really 250 million shares?! We’re still going to finish up and publish our analysis and model but how on earth can such an IPO be priced given that current year revenues will fall in the range of $50M?

The simple math of the IPO is that if the deal is priced at $1, the shares will be at 5x 2009 sales. As one simple data point we compare it to Salesforce.com (CRM) which is sporting a TEV / Revenue multiple of 2.8x.

We’ve looked this over a few times and keep thinking that we are making some incredible mistake. It’s as if someone forgot to put in the 1-for-10 reverse split to make the math work for the deal to get priced.

So at the risk of appearing dazed and confused we put our observation out there and hope someone can help us to get better information.

If the company plans to do a reverse split why wouldn’t they do it before filing the S-1? In this market there’s hardly a huge rush to get filed and out there.

A 1 for 10 begins to make potential IPO pricing make sense but we would consider a much higher ratio to get the projected price into the double digits.