This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Deal: Millennial Shares Dive After Deal News

NEW YORK (The Deal) -- Shares of Millennial Media (MM) tumbled more than 18% Wednesday, August 14, after the Baltimore-based company unexpectedly announced the acquisition of rival JumpTap to form a mobile advertising platform comparable to Google's (GOOG).

Under the mostly stock transaction, JumpTap shareholders will receive about 24.6 million shares of Millennial, or approximately 22.5% of outstanding shares, Millennial said August 13, after the close of regular trading.

A cash consideration of slightly under $12 million will also be made to shareholders of JumpTap, the second-largest independent mobile advertising platform in the U.S. behind Millennial. According to a statement issued by Millennial, JumpTap's enterprise value is approximately $232 million, based upon Millennial's August 9 closing price of $9.13 and the $12 million cash consideration.

"Long term, I think this makes sense because scale matters, and this brings scale," said James Cakmak, a Telsey Advisory Group analyst. "It makes them a much more formidable player. But there's a lot of questions that have surfaced in regards to timing and pricing and financial potential."

According to International Data figures, the new entity will push Millennial's mobile advertising market share to about 28.7% from 18%, putting its share at a level comparable to powerhouse Google, Millennial CEO and co-founder Paul Palmieri said in a Tuesday earnings call with investors.

Still, shares of Millennial, which trade on the New York Stock Exchange under the symbol MM, closed down 18.82%, to $6.90, on Wednesday.

Clearly, the JumpTap acquisition didn't sit well, because on Tuesday, Millennial reported second-quarter revenue of $57 million, a 45% jump from $39.4 million for the same period a year earlier.

Why the investor backlash? Cakmak explained that even though the scale advantages are clear, "the valuation for JumpTap could be slightly rich as compared to other ad-tech companies in the space."

He also said investors may be disappointed because, despite the 45% rise in quarterly revenue, an even-higher increase -- to $59.23 million, according to consensus estimates -- was expected.

The acquisition of Boston-based JumpTap is expected to close in the fourth quarter, subject to regulatory and shareholder approval. Upon completion, JumpTap CEO George Bell will join Millennial's board of directors as vice chairman.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,042.74 -36.83 -0.22%
S&P 500 1,997.62 +0.88 0.04%
NASDAQ 4,561.7120 +4.0170 0.09%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs