IPO Preview: FriendFinder Network

May.10.11 | About: FriendFinder Networks (FFNT)

Based in Boca Raton, Fla., FriendFinder Network (FFN) is scheduling a $55 million IPO with a market capitalization of $289 million at a price-range mid-point of $11 for Thursday, May 12. Full IPO calendar includes nine others for the week of May 9.

Summary: FFN is the result of a leverage buyout of Penthouse Properties.
For 2010 versus 2009:
. Sales grew 5% to $345mm.
. Gross profit declined to 68% from 72%.
. Operating income declined to 47% from 54%.
. Interest expense was 26% of revenue and 123% of operating income.
. Net loss increased 5% to $43mm from $41mm.

Conclusion: FFN continues to generate poor financials and is burdened with a very high interest expense, with only 5% sales growth for 2010 compared to 2009. Stay away from this IPO.

FFN Valuation Metrics

Business: FFN is one of the most heavily-visited social networking websites in the world. Through an extensive network of websites, it has a base of over 270 million members in 170 countries offering a wide variety of online services FFN’s websites are intended to appeal to members of diverse cultures and interest groups, and include social networking, live interactive video and premium content websites.

History: FFN had an aborted IPO in January 2010. Here is the January 2010 IPO Preview.

Dividends: FFN is prohibited by the provisions in indentures from declaring dividends. FFN expects that any future credit facility will contain terms prohibiting or limiting the amount of dividends FFN can pay.

Use of IPO Proceeds: $49.4 million is to be allocated to repay debt.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.