TubeMogul Raises Less Than Expected With IPO

Wall Street Still Cold On Ad-Tech Companies It Sometimes Sees as too Labor-Intensive

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Wall Street's disenchantment with ad-tech spilled over to the IPO market today, with video-ad-buying software company TubeMogul taking the hit.

The company's stock may have risen over 49% at one point, but that was hardly a consolation for the eight-year-old TubeMogul, which had to scale back its targeted $11 to $13 per share to $7 and ended up raising only $43.75 million after seeking $93 million.

TubeMogul CEO Brett Wilson
TubeMogul CEO Brett Wilson

"´╗┐It's a challenging fundraising environment for companies in the ad-tech space," said TubeMogul CEO Brett Wilson in an interview with Ad Age. "But the fact that we got a deal done and brought on a number of high quality public equity investors really is a testament to the differentiation of our models versus others."

The others -- YuMe and Tremor are TubeMogul's closest competitors -- have struggled mightily after making their public debuts. YuMe sits at close to $6 after an IPO price of $9. Tremor is trading at just below $4 dollars after going out at $10.

Many point to these companies' labor-heavy sales operations as a reason for the turbulence, citing their reliance on lots of salespeople as proof that they aren't any different than traditional ad networks.

"The companies in their space that came public before TubeMogul (many/most of whom I shorted at one time or another) could never back up their claims with margins for being tech plays," wrote Rob Majteles in an email. Mr Majteles is founder and managing partner of Treehouse Capital. "As a result, they made the entire area difficult for investors to believe. That hurt TubeMogul's offering." Mr. Majteles also said he is a friend of Mr. Wilson.

Without naming names, Mr. Wilson tried to paint TubeMogul in a different light. "Our approach is to build self-serve software, where our clients can manage everything on their own," he said.

Mike Vorhaus, president at market research and consulting firm Magid Advisors, said TubeMogul did "the conservative, wise thing" by bringing down its target price. The company, he said, avoided the situation Facebook ran into when it priced its shares high and ended up falling on its IPO today. Looking at TubeMogul's business, Mr. Vorhaus said the amount of funding mattered little. "When I look at their numbers, I believe they'll be going cashflow positive soon," he said.

TubeMogul is listed on Nasdaq under the symbol "TUBE." It raised more than $53 million in funding before its IPO.

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