Details on Bankrate's IPO This Week

Jun.13.11 | About: Bankrate Inc. (RATE)

Based in North Palm Beach, Florida, Bankrate (proposed RATE) is scheduling a $300 million IPO with a market capitalization of $1.5 billion at the price range mid-point of $15 for Friday June 17, 2011. The IPO calendar includes three IPOs this week.

Summary - This 35-year-old company provides financial rate information through its own web sites and through distribution agreements. It was public for 10 years and then was taken private in August 2009, then loaded up with debt where the proceeds likely went out to the new owners as dividends.

Valuation - At the price range mid-point of $15, based on annualizing results for the March 211 quarter, RATE is valued at 3.8 times sales, 74 times annualized earnings for the March 2011 quarter, 2 times book and -12 times tangible book value (which indicates a lot of debt, in this case incurred to pay dividends to pre-IPO shareholders from a leveraged buyout).

RATE Valuation Metrics here.

Conclusion - RATE is a mature Internet company where advertising generates most of the revenue, targeting a mature market Even though there is apparent demand for the RATE pre-IPO, it seems that a P/E of 74 times annualized March 2011 quarter results is on the high side and leaves little room for error.

Content Distribution - RATE distributes content through owned and operated websites, online co-brands, and print partners.

RATE owns a network of content-rich, proprietary websites focused on specific vertical categories, including mortgages, deposits, insurance, credit cards and other personal finance categories.

RATE also develops and provides web services to over 75 co-branded websites with online partners, including some of the most trusted and frequently visited personal finance sites on the Internet such as Yahoo, AOL, CNBC and Bloomberg. In addition, RATE licenses editorial content to over 100 newspapers on a daily basis including The Wall Street Journal, USA Today, The New York Times, The Los Angeles Times and The Boston Globe.

Major Shareholder - Apax Holdings advises the fund, Ben Holding, which owns 88% of the pre-IPO. Ben Holding is selling 10% of the stake, which is over half of the selling shareholder’s stock.

Use of Proceeds - Shareholders intend to sell 7.5 million shares. RATE expects to sell 12.5 million shares to net $167 million. Also, $117 million is expected to repay debt and $38 million for advisory fees.

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