DoubleVerify Could Falter When The IPO Lockup Expires

Oct. 12, 2021 6:49 PM ETDoubleVerify Holdings, Inc. (DV)9 Comments

12.68K Followers

Summary

The DV lockup expiration on October 18th is a short opportunity for risk-tolerant investors.
When the IPO lockup expires, more than 142 million currently-restricted shares will be eligible for sale.
Significant sales of currently-restricted shares of DV could flood the secondary market and cause a sharp, short-term decline in share price.

Quality control certification, checked guarantee of standard — anyaberkut/iStock via Getty Images

When the 180 lockup period for DoubleVerify Holdings, Inc. (NYSE:DV) ends on October 18th, the company's pre-IPO shareholders and insiders will be able to sell more than 142 million currently-restricted shares for the first time. This number dwarfs the 13 million shares currently trading pursuant to the IPO. Any large sales could flood the secondary market and cause a sudden, short-term downturn in the share price of DoubleVerify.

Aggressive, risk-tolerant investors should consider shorting shares of DV ahead of the IPO lockup expiration.

Business Overview: Digital Platform That Helps Organizations Track and Analyze Digital Marketing

DoubleVerify operates a software platform that measures and analyzes digital marketing efforts. Its primary products include quality tracking, predictive digital ad performance, programmatic ad enhancement, and supply-side solutions.

The advertising industry has expanded beyond many conventional media to include a wide spectrum of digital platforms and channels. Tracking and measuring the performance across the spectrum of social channels, publishers, and digital platforms has been challenging, which makes it more difficult for marketing departments to determine where to spend their budgets. In addition, the digital marketplace can allow ad fraud and objectionable content to spread unchecked. Many organizations rely on third-party solutions like DoubleVerify to protect their brand names while optimizing the performance of their digital marketing campaigns.

The DoubleVerify platform provides data analytics that allow marketing professionals to improve the performance of their advertising efforts. The platform uses its proprietary technology, DV Authentic Ad, which tracks whether the digital ad is displayed in an appropriate digital environment and in the correct geographical locations. The platform does this in real-time, and the data analytics are measured across the entire digital marketing ecosystem, which includes social media channels, programmatic platforms, and digital publishers.

DoubleVerify analyzes approximately 200 billion transactions per day as well as over 5 billion digital ad transactions per day. Their client base is currently over 1,000 customers including large global organizations. The industries that DoubleVerify serves include healthcare, automotive, technology, telecommunications, financial services, and consumer goods. The company has 23 offices across 15 countries including Japan, Germany, France, Brazil, Australia, Singapore, Israel, the United Kingdom, and the United States. The average client has been with DoubleVerify for at least 6 years and the company has a client retention rate of between 95% and 100%.

DoubleVerify is headquartered in New York City and has approximately 650 employees.

Financial Highlights

DoubleVerify reported second quarter financial highlights for the period ending June 30, 2021:

Revenue was $76.5 million, representing an increase of 44%.
Advertiser Direct revenue totaled $31.7 million for an increase of 34%.
Media Transactions Measured for Social grew by 100%. MTM for CTV grew by 89%.
APAC revenue grew 73%.
EMEA revenue grew 62%.
Advertiser Programmatic revenue totaled $37.9 million, representing an increase of 57%.
Supply-Side revenue grew 35% to $7 million.
Net loss totaled $12.6 million.
Adjusted EBITDA totaled $21.2 million.

Management

CEO Mark Zagorski has served in his position since July 2020. He has previously held executive positions at Telaria, eXelate, the Nielsen Company, MediaSpan, WorldNow, and Modem Media. He earned an MBA from the University of Rochester and a BS in Finance from Gannon University, from which he was awarded an Honorary Doctorate of Humane Letters.

CFO Nicola Allais has served in his position since November 2017. His previous experience comes from executive financial positions at Penton, Downtown, Primedia, Ernst & Young, and Home Box Office. He earned an MBA from the Columbia Business School and a BA from Princeton.

Biographical information is sourced from the company's S-1/A.

Competition: Tremor International, Quantcast, Webtrends, and More

The digital ad analytics sector has many competitors including Tremor International, Quantcast, Webtrends, Sizmek, Comscore, Integral Ad Science, White Ops, Meetrics, MOAT, OpenSlate, Alenty, and Adometry.

Early Market Performance

The underwriters priced the IPO at $27 per share. The stock closed on its first day of trading at $35.77. Although the price dipped initially reaching a low of $27.33 on May 19, it reached a high of $47.06 on June 29. DV currently has a return from IPO of more than 17%.

Conclusion: Short Shares Ahead of October 18th Lockup Expiration

When the DV lockup expires on October 18th, a slate of company insiders and pre-IPO shareholders will finally be able to take some money off the table and sell their currently-restricted shares.

(Source: S-1/A)

We believe that these pre-IPO shareholders and company insiders will be especially eager to cash in considering the stock has a return from IPO of more than 17%. Any significant sales could flood the market with shares and cause a short-term downturn. We recommend that investors short shares ahead of the lockup expiration and cover positions during the October 19 and 20 trading sessions.

This article was written by

Don Dion

12.68K Followers

Don Dion is the CEO of Inland Management, a company focused on acquiring, subdividing, developing and marketing large tracts of land on the fringes of major metropolitan markets. Inland Management has sold land in all 48 contiguous states totaling billions of dollars. As CEO, Don is responsible for helping to maintain and enhance the firm’s strong financial position and identifying opportunities for growth. In addition to his role at Inland Management, Don Dion is the Chief Investment Officer of DRD Investments, LLC. Based in Naples, FL. and Williamstown, MA., DRD Investments is a family office focused on managing a long/short hedge fund, real estate, venture capital and various other financial assets for the Dion family. Don also serves as the trustee of the Dion Family Foundation, which focuses on helping individuals with tuition assistance at Catholic Institutions for grammar school, high school, and college education. The foundation also helps individuals by supporting Massachusetts General Hospital. Don is on two leadership boards and advisory committees at Massachusetts General Hospital and the Home Base Program (a partnership between Mass General and the Red Sox Foundation). He consults with Saint Dominic's Academy and serves as a trustee of Saint Michael’s College. Previously, Don was the founder and CEO of Dion Money Management, a fee-based investment advisory firm for affluent individuals, families and non-profit organizations. Founded in 1996 and based in Williamstown, MA. and Naples, FL., Dion Money Management managed approximately one billion in assets for clients in 49 states and 11 countries. While at Dion Money Management, Don was responsible for setting investment policy, creating custom portfolios, and overseeing the performance of client accounts. Don sold the firm to NYC-based Focus Financial Partners (FOCS) on September 1, 2007 and no longer manages money for other families or institutions. Don remains a shareholder of Focus Financial Partners (FOCS). Don is also the retired publisher of the Fidelity Independent Adviser family of newsletters, which provided a broad range of investor commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With nearly 100 thousand subscribers in the United States and 29 other countries, Fidelity Independent Adviser published two monthly newsletters and one weekly newsletter. The flagship publication, Fidelity Independent Adviser, was published monthly for 16 years and reached over 60,000 subscribers. In 2011 Don and his daughter Carolyn co-authored the Ultimate Guide to ETFs, available on Amazon.com. Prior to founding Dion Money Management, Don co-founded Litchfield Financial Corp. (LTCH) with Summit Partners. Don served as Chairman and CEO of Litchfield, which was listed on the Nasdaq in 1992 and acquired by Textron Corp. (TXT) in 1999. Don was also the Executive Vice President, CFO and General Counsel for Patten Corporation (BGX) from 1986 to 1988, where he played a critical role in the company’s successful initial public offering on the New York Stock Exchange. From 1983 to 1985, Don was a corporate lawyer with the Boston Law Firm of Warner and Stackpole. Before joining Warner and Stackpole, Don worked as a C.P.A. for Ernst and Young from 1979 to 1983. Don graduated with honors from Saint Michael’s College in 1976 with a B.S. degree in Economics and Business Administration. He received his J.D. from the University of Maine Law School in 1979 and his LL.M. from Boston University Law School in 1982. Don can be reached at donalddion@gmail.com

Analyst’s Disclosure: I/we have a beneficial short position in the shares of DV either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Summary

Business Overview: Digital Platform That Helps Organizations Track and Analyze Digital Marketing

Financial Highlights

Management

Competition: Tremor International, Quantcast, Webtrends, and More

Early Market Performance

Conclusion: Short Shares Ahead of October 18th Lockup Expiration

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