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  • TubeMogul reduces IPO target to $57.5M from $94M and cuts target price range to $7-$8 from the original anticipated range of $11-$13.
  • A short on TubeMogul stock is only recommended at the original $11-$13 range.
  • An undersubscribed offering was anticipated due to extremely lofty original valuation, so this is not surprising.

Only July 11 I wrote an article with a thesis stating that the TubeMogul (Pending:TUBE) IPO valuation is too rich compared to publicly traded competitors, specifically YuMe (NYSE:YUME). Now less than one week later, the IPO is undersubscribed and TubeMogul has been forced to slash its pricing target from $11-$13 to $7-$8. As a result, I am updating my suggested short thesis.

At this new updated pricing, the company is set to only raise about $57.5M compared to prior expectations of $94M. However, according to the ammended S-1, insider buying of the IPO has been increased. Trinity Ventures, owner of 26.2% of TubeMogul, is said to be buying $5M worth of shares. Foundation Capital, which owns 22.4% of TubeMogul, will be buying $20M worth. As it stands now, insiders have plans to buy up greater than half of the public offering.

Due to this downward re-pricing, I have changed my expectations. Although I do believe that at $7-$8, TubeMogul is still considerably overvalued, but no asymmetric risk reward opportunity exists in the shorting of the stock at those levels. I continue to recommend a short of TubeMogul stock but only at the original IPO pricing levels. So if the stock happens to run to the $11-$13 range, a short can be initiated. My position on YuMe has not changed and I am still very long this stock with a price target of $15.

Source: Update: TubeMogul IPO Price Reduction Changes Short Thesis