Shares of Roku shot up 68% in the first day of trading in its initial public offering on NASDAQ, as investors bought up stock in the streaming-media device and platform that’s challenging tech giants Apple, Google and Amazon.
The company began trading on NASDAQ under the “ROKU” stock symbol around 10:40 a.m. ET Thursday. Roku priced its shares at $14 per share (at the high end of its previous range), and the stock quickly rose to more than $18 per share in initial trading to yield a market cap of more than $1.7 billion. The peak in early trading was $18.55 per share. Roku raised about $220 million from the offering of 15.7 million shares.
[UPDATE, 12:44 p.m. ET: Roku shares were trading up more than 64% over the opening price, hitting an intra-day high of $23.06 per share.]
[UPDATE 2, 4:05 p.m. ET: Roku stock ended the day up 68% over the $14 IPO price, to close at $23.50 per share. That currently gives the company a market cap of around $2.2 billion.]
Roku faces massive, deep-pocketed competitors — but so far the 700-employee company has more than held its own in the streaming-media device market. In the first quarter of 2017, Roku had 37% share of all streaming devices owned by U.S. broadband households, according to research firm Parks Associates, ahead of Amazon Fire TV and Fire TV Stick (24%), Google’s Chromecast (18%) and Apple TV (15%).
In Roku’s IPO registration statement, the company disclosed healthy revenue gains and a shift toward a more diversified sales mix that includes advertising income — and while it’s not profitable, the company narrowed losses in the first half of 2017.
Roku generated $199.7 million in revenue during the first half of 2017, up 23% from $162.3 million during the same time last year. It reported a net loss of $24.2 million for the first six months of 2017, versus a net loss of $33.2 million in the comparable year-earlier period.
For the first six months of this year, 59% of Roku’s revenue came from the sale of streaming devices. The other 41% from what the company calls its platform business, which includes ad sales on advertising-supported channels, as well as licensing fees, fees for placement in the Roku channel store and more. The Roku platform business grew 91% year-over-year.
According to the regulatory filing, Roku had 15.1 million active user accounts as of June 30, which stream an average of three hours of video daily. The company reported average revenue per user of $11.22 as of the end of Q2, which it calculates based on revenue and average number of active accounts during the preceding four fiscal quarters; that was up 35% from ARPU of $8.32 a year earlier.
Roku in 2008 shipped the very first streaming-media player to watch Netflix, formed out of a spinoff project from Netflix. Roku is based in Los Gatos, Calif., literally right next to Netflix’s headquarters. Netflix alone accounts for about one-third of all hours streamed on Roku devices.
Underwriters of Roku’s IPO are Morgan Stanley and Citigroup, as well as Allen & Co., Needham & Co., RBC Capital Markets, Oppenheimer & Co., and William Blair.