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RealD IPO: A Bet on 3D's Future


Was Avatar the start of a new 3D viewing experience, or part of a trend that may fizzle before there is time to release a sequel? As a global licensor of stereoscopic 3D technologies, the success of RealD -- RLD's upcoming IPO hinges on the "right" answer to that question -- that 3D is the wave of the future.

Similar to Tesla (TSLA - Get Report), investors will once again be asked to look into their crystal balls to determine future consumer trends and evaluate a company on its growth potential rather than its current fundamental performance.

Timing is everything. By scheduling RLD's IPO the week after Universal releases its first RealD film, Despicable Me, last Friday, JP Morgan (JPM - Get Report) may be assuming the hype will boost the opening premium when it prices 10.75 million shares between $13 and $15.

RLD should be able to support a mid-range pricing, followed by an opening premium, but with continuing bottom-line losses, the stock price may level off in the aftermarket.

Additionally, insiders will be selling 4.75 million shares, or 44% of the total offering, as there is a minimal amount of private equity involvement. Investors will be expected to look past these "flaws" and focus on the big picture as 3D attempts to take over the movie-going experience and transition into consumer's living rooms.

    RealD -- RLD
  • Lead Underwriter -- JP Morgan
  • 10.75 million shares
  • Current Price Range $13 to $15
  • Deal size to the mid-range -- $150.5 million
  • Market cap to the mid-range -- $667.3 million
  • Sector -- Radio & TV Communications Equipment

The limited 3D release of Disney's (DIS - Get Report) 2005 Chicken Little earned RLD the distinction as the first to enter the market. Continued branding efforts have led to a close association between RLD's brand and the overall 3D experience, nearly making them one and the same.

Management has stressed the importance of achieving this level of branding, viewing its product as "second to none." By building relationships with retailers and consumer product manufactures, RLD hopes to integrate its 3D technology in upcoming merchandise such as LCD televisions, game consoles and laptops, all of which are expected to hit the market in upcoming months.

Unfortunately, there is still the looming question of whether this technology will generate widespread acceptance or simply develop a cult following among techies. Regardless of the immediate outcome, RLD remains an innovator in the industry and is expected to adapt its services to propel 3D beyond the "gimmick" phase.

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