TechTarget IPO - CNET Comp - Solid But Unspectacular

Jason Jones: TechTarget's IPO is scheduled for this week. The company provides online content about IT and targets buyers and sellers of IT products.  It competes with IDG, CMP Media, and Ziff Davis Media.  CNET is the most similar public comparable, although TechTarget has a slightly more enterprise focus. 

Here are the quick details:

Proposed ticker: TTGT

Price range: $12-$14 (I use $13 for my assumptions)

Shares: 39m

Market Cap: $507m

Cash: $105m (post IPO)

Debt: $20m

Enterprise Value: $421m

'05 EBITDA: $13m
'06 EBITDA: $20m (+51%)
'07 EBITDA: $26m (+30%) - my rough estimate

'07 EV/EBITDA: 16x

This compares to CNET's '07 EV/EBITDA of 14x, growing EBITDA roughly 20%.  The valuation seems reasonable but not overly enticing.   

On the positive side, both TTGT and CNET may be acquisition targets for their high quality original content (see AMZN's acquisition of DPReviews today as an example of M&A in the digital content sector).  On the negative side, both firms have a heavy concentration of technology advertisers and are subject to fluctuations in the IT ad market. 

The offering will be for 7.7m shares and will raise roughly $75m to be used to pay down debt, for working capital and for general business use.  Morgan Stanley and Lehman Brothers will be the lead underwriters.

I think TTGT will have a solid but not spectacular IPO.