-Email Thomas Rasmussen
Just three months after filing its initial IPO paperwork, OpenTable set the terms of its $46m offering last week. At the high point of the $12-14 range for its shares, the company would sport a valuation just shy of $300m, or about 6x trailing 12-month (TTM) revenue and 50x TTM EBITDA. For the past three years, OpenTable has grown revenue at a compound annual rate of about 43%. Despite skepticism about the IPO market and OpenTable’s prospects during a period when its primary customers (restaurants) are struggling, the online restaurant reservations service should debut on the Nasdaq under the ticker ‘OPEN’ in the next week or two. OpenTable’s offering comes as Solarwinds is also slated to go public, after its prospectus aged for more than a year.
OpenTable has not disclosed how it will allocate the funds that it will raise in its offering. However, we believe it might be gearing up to make its first foray into M&A. One indication: the presence of Allen & Co as one of OpenTable’s four underwriters. Sure it had a hand in Google’s IPO, but Allen & Co is certainly known more as a media banker than a tech underwriter. OpenTable’s offering is being led by Merrill Lynch, with ThinkEquity and Stifel Nicolaus also on the ticket.
If OpenTable were to shop, we suspect it could well look to bolster its international operations. Since 2004, the San Francisco-based company has sunk millions of dollars into expanding outside the US, but has little to show for it. Its international business, which is burning money, accounts for just 5% of total sales. (The vendor recently pulled out of Germany and France.) We see a parallel between what OpenTable has run into in its unsuccessful international expansion and the early woes that its rich Web services cousin eBay experienced in trying to translate its business outside of its home market. After struggling to address foreign markets by just expanding its existing online auction service, eBay has been picking up local foreign sites that fit the nuances of business and culture in those markets. Ebay has spent billions of dollars lately buying its way into foreign markets.