IPO Preview: Professional Diversity Network

| About: Professional Diversity (IPDN)

Based in Chicago, IL, Professional Diversity Network (NASDAQ:IPDN) scheduled a $20 million IPO with a market capitalization of $61 million at a price range mid-point of $11 for Tuesday, March 5, 2013.

Two IPOs are scheduled for the week of March 4. The full IPO calendar is available here.

S-1 filed February 13, 2013.

Manager, Joint Managers: Aegis Capital
Co Managers: Merriman Capital.

IPDN is in the recruitment and advertising business for diverse minorities. Its exclusive partnership with Monster Worldwide (NYSE:MWW), $569mm market cap, terminated December 31, 2012.

IPDN has a new non-exclusive relation with LinkedIn (NYSE:LNKD), which started January 1, 2013.

The most recent financials are for the nine months ended September 2012, so they are in essence out-of-date, and also not relevant because IPDN's marketing relationships changed December 31, 2012.

Valuation Ratios

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annualized Sept 9 mos, proforma net

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Glossary of financial terms

Avoid IPDN because its business plan is completely in flux at the moment. And even if the plan were not in flux, 10 times annualized earnings for a moderately growing business seems high.

IPDN generates revenue through two sources - recruitment and advertising.

The principal customer in the recruitment sector has been Monster Worldwide. However, the agreement with Monster Worldwide expired on December 31, 2012, and was not renewed.

On November 12, 2012, IPDN entered into a non-exclusive diversity recruitment partnership agreement with LinkedIn, which became effective on January 1, 2013.

LinkedIn may resell to its customers diversity-based job postings and recruitment advertising on IPDN websites. The principal customer in the advertising sector is Apollo Group (NASDAQ:APOL), the parent of the University of Phoenix. APOL has a market cap of $1.93 billion.

IPDN's exclusive recruitment arrangement with Monster Worldwide expired on December 31, 2012.

IPDN says that beginning January 1, 2013, it "will seek to market our diversity recruitment services directly to employers who are not subject to the restricted account list of 1,000 companies selected by LinkedIn."

IPDN is at least honest in its SEC filings. "We will need lead time to develop the new sales group and it will require significant additional investments to successfully market and sell our recruiting services directly to employers and our ability to succeed is uncertain."

Competition includes LinkedIn (which is also a marketing partner), ethnic minority focused social networking websites, such as Black Planet and MiGente, and other companies such as Facebook, Google, Microsoft and Twitter that are developing or could develop competing solutions.

Monster Worldwide is now also a competitor.

IPDN expects to net $17.3 million in IPO proceeds, which are allocated as follows:
15% for sales and marketing

25% for product development

40% of the net proceeds strategic acquisitions and reserve

remaining 20% for future growth opportunities.

Disclaimer: This IPO report is based on a reading and analysis of IPDN S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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