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PubMatic (PUBM) intends to raise $100 million from the sale of its Class A common stock in an IPO, according to an amended registration statement.

Redwood City, California-based PubMatic was founded to enable real-time programmatic advertising transactions via its specialized purpose-built advertising database and delivery infrastructure.

The system exists to help publishers and application developers monetize their advertising placement inventory in an efficient and reliable manner across different devices and platforms.

Management is headed by co-founder and CEO Rajeev Goel, who was previously product marketing director at SAP AG (SAP).

Below is a brief overview video of PubMatic:

Source: PubMatic

The firm provides a sell side advertising infrastructure platform within the digital advertising ecosystem, as shown in the graphic below:


In addition, PubMatic has integrated its system with demand side platforms such as The Trade Desk (TTD) and Google DV360 (GOOG).

PubMatic has received at least $96 million from investors including Nexus India Capital, Helion Venture Partners, August Capital and Draper Fisher Jurvetson.

The company seeks to acquire new customers such as media companies, app developers, ecommerce providers and OTT platform operators, essentially firms that seek to monetize their audiences through online advertising.

On the demand side, PUBM has entered into Supply Path Optimization agreements directly with advertisers, agencies to provide favorable terms and improved workflows.

Sales and Marketing expenses as a percentage of total revenue have been unevenly trending lower as revenues have increased.

The Sales and Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Sales and Marketing spend, has remained stable at 0.4x in the most recent reporting period.

According to a 2020 market research report by ResearchAndMarkets, the global market for programmatic advertising currently valued at an estimated $5.2 billion in 2020 and is expected to reach $33.7 billion by 2027.

This represents a forecast very high CAGR (Compound Annual Growth Rate) of 30.7% from 2020 to 2027.

The main drivers for this expected growth are the use of real-time bidding and global automated guaranteed auction environments.

Also, by region, China will show the greatest growth potential as part of the larger Asia Pacific region, reaching a forecast $5.7 billion in spend by 2027.

Major competitive or other industry participants include:

  • Magnite
  • Google (GOOG)

PubMatic’s recent financial results can be summarized as follows:

  • Growing topline revenue
  • Increased gross profit but decreasing gross margin
  • Growing operating profit and operating margin
  • Increased net income but uneven cash flow from operations

Below are relevant financial results derived from the firm’s registration statement:


Source: Company registration statement

As of September 30, 2020, PubMatic had $40.6 million in cash and $132 million in total liabilities.

Free cash flow during the twelve months ended September 30, 2020, was $4.1 million.

PUBM and selling shareholders intend to sell 5.9 million shares of Class A common stock at a midpoint price of $17.00 per share for gross proceeds of approximately $100 million, not including the sale of customary underwriter options.

The firm is planning to sell 2.655 million shares and selling stockholders will sell 3.245 million shares.

Class A stockholders will be entitled to one vote per share and Class B shareholders will have 10 votes per share.

The S&P 500 Index no longer admits firms with multiple classes of stock into its index.

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $833.7 million.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 12.34%.

Per the firm’s most recent regulatory filing, the firm plans to use the net proceeds as follows:

As of the date of this prospectus, we have no specific plans for the use of the net proceeds we receive from this offering. However, we currently intend to use the net proceeds we receive from this offering primarily for working capital and other general corporate purposes, which may include product development, general and administrative matters, and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that complement our business, although we have no present commitments or agreements to enter into any acquisitions or investments. We will have broad discretion over the uses of the net proceeds of this offering.

Management’s presentation of the company roadshow is available here.

Listed underwriters of the IPO are Jefferies, RBC Capital Markets, JMP Securities, KeyBanc Capital Markets, Oppenheimer & Co. and Raymond James.


PubMatic is seeking public capital market investment as it continues to generate profits and impressive free cash flow.

The firm’s financials show reasonably strong topline revenue growth and earnings growth despite the Covid-19 pandemic.

Sales and Marketing expenses as a percentage of total revenue have been largely stable as has its Sales and Marketing efficiency rate.

The market opportunity for programmatic advertising services is forecast to grow at a very high rate over the coming years, so PUBM enjoys a strong industry tailwind for its sell-side offering.

Jefferies is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of 127.4% since their IPO. This is a top-tier performance for all major underwriters during the period.

As to valuation, compared to a basket of publicly held Software (Internet) companies compiled in January 2020 by valuation expert Aswath Damodaran, Ph.D, PubMatic is seeking an Enterprise Value / Revenue multiple of 6.57x versus 7.64x for the public basket, so in this admittedly general respect, the IPO appears reasonably priced.

Given the firm’s growth prospects, reasonably priced IPO and apparent pandemic resilience, my opinion on the IPO is a BUY at up to $17.00 per share.


Expected IPO Pricing Date: December 8, 2020.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice. Past performance is no guarantee of future results.)

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