Will Redgate Media's IPO Entice Investors Out of the Gate?

| About: Redgate Media (RGM)

Redgate Media (RGM), a China based provider of advertising and advertising agency services, is expected to price its IPO this week.

Business Overview (from prospectus)

We are a diversified media company in China. We primarily provide advertising and advertising agency services through an integrated cross-media platform that enables advertisers to conduct multiple-channel marketing campaigns targeting higher-income demographics. Our comprehensive portfolio of assets in television, radio, outdoor and Internet media reaches over 226 million people in key metropolitan markets, such as Beijing and Shanghai, as well as more than 160 other cities or counties throughout China.

The wide coverage and diversity of our advertising channels allow leading international and domestic brand names flexibility and efficiency in executing effective marketing campaigns. Our cross-media platform is composed of: (i) our broadcast network, consisting of our television advertising platform and radio network; (ii) our outdoor advertising network, consisting of large-format billboards, light boxes and other displays at commercial and residential locations; and (iii) our Internet and interactive services. We own our light-box network in Shanghai and operate the remainder of our platform’s assets through contractual arrangements with the owners or operators of such assets.

Offering: 5.5 million shares at $6 - $8 per share. Net proceeds of approximately $22.3 million will be used to fund future earn-out payments and recent acquisitions.

Lead Underwriters: Brean Murray, i-Bankers Securities.

Financial Highlights:

Our total revenues increased significantly by 262% from $5.3 million in the nine months ended September 30, 2008 to $19.1 million in the nine months ended September 30, 2009...Our operating costs and expenses increased by 124.2% from $7.6 million in the nine months ended September 30, 2008 to $17.1 million in the same period in 2009...Our general and administrative expenses increased by 35.2% from $1.4 million in the nine months ended September 30, 2008 to $1.9 million in the same period in 2009... We had a loss from operations of $2.5 million in the nine months ended September 30, 2008 and income from operations of $1.3 million in the nine months ended September 30, 2009...

Competitors

As a whole, our business competes primarily with a number of companies that own or operate diversified media assets in China, such as Tom Group and Xinhua Sports and Entertainment Limited (NASDAQ:XSEL). We generally compete with them in acquiring desirable advertising media assets and attracting advertising clients that want to execute cross-media advertising campaigns.

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