Apple TV competitor Roku hopes to raise as much as $252 million in IPO

Roku, the maker of streaming video players that have become a favorite of cable TV cord cutters, plans to raise up to $252 million in its IPO.

The company said in a filing withe SEC on Monday that it plans to sell 15.8 million shares in the offering at a range of $12 to $14 per share. 

The offering, which includes share sales from both Roku and some of its private shareholders, would value the company at $1.3 billion if it prices at the high end of the range. 

Roku sells inexpensive boxes that allow consumers to stream Netflix, YouTube and other streaming video services to their televisions. It also offers its software to other consumers electronics makers that want to use it as the interface for their smart TVs.  

Roku is still losing money — $24.2 million in the first half of 2017 — but its revenue is growing fast as cord-cutters and other consumers snap up its devices, the cheapest model of which sells for $30.  The company also makes money from advertising and licensing its technology. 

Risk factors

Younger consumers are increasingly abandoning cable TV for streaming video, but Roku faces intense competition in a crowded market, and its business is dependent on securing access to popular content from providers like Netflix and Amazon.

The company, whose senior management includes several former Netflix executives, plans to list its share on the Nasdaq exchange under the ticker "ROKU." 

The offering is being led by investment bank Morgan Stanley. The IPO includes an option for the underwriters to purchase an addition 2.35 million shares. 

In the first half of 2017, Roku posted revenue of $199.7 million, up 23% from the same period in 2016, according to the S-1 filing. In fiscal year 2016, it had a total of $398.6 million in revenue, up 25% from 2015.

Roku intends to set up a dual-class stock structure, which will give more power to pre-IPO investors than new ones. That will make it easier for current shareholders, including its CEO, to retain control after the public offering. Existing investors will get a new class of stock that will give them 10 votes for every share they own. By contrast, shares sold in the public offering will give investors who own them one vote per share.

This model has been increasingly common as tech companies go public. Google and Facebook both have similar stock structures. But the practice has been controversial, because it can insulate founders and other insiders from legitimate shareholder concerns.

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