Roku files for an initial public offering


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Roku has made official what’s been rumored: it wants to go
public. 

The digital media player maker publicly filed its S-1 with the
Securities and Exchange Commission on Friday — the first big
step for a company seeking an initial public offering of its
shares.

The company plans to list shares on the Nasdaq stock exchange
under the ticker “ROKU.”

Nominally, according to the filing, the company seeks to raise as
much as $100 million through the stock sale — though that number
is just a placeholder and will likely change as the date of the
IPO draws nearer.

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.

Roku sells 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 who want to use it as the interface for their smart
TVs. 

Business has been good for Roku. In the first half of 2017,
it posted revenue of $199.7 million, up 23% from the same
period in 2016, according to the filing. In fiscal year 2016, the
company had a total of $398.6 million in revenue, up 25% from
2015.

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As of June 30, Roku had 15.1 million active accounts on its
service, according to the filing. Customers using Roku devices or
TV’s with its interface streamed 6.7 billion hours of
internet video in the first half of 2017 — up 62% from the same
period in 2016, the company said in the filing.  

Currently, most of Roku’s revenues come from the sale of the
streaming devices, but the company plans to increase its number
of active users and grow the amount of revenue per user. Each
active user is currently worth $11.22 to the company — up
from $9.28 in 2016, and $6.48 in 2015.

More active users means more platform revenue, which is a mix of
advertising sales, streaming subscriptions, and licensing
arrangements. These
licensing agreements consist of
 a series of
partnerships Roku has made with TV makers, such as Haier and
Chinese heavyweight TCL. Roku provides a blueprint that lets
TV makers bake Roku’s technology, including its slick operating
system, into its smart TVs in return for a licensing fee.

Despite this growth, Roku is still losing money. Since 2002, the
company has incurred a total deficit of $244 million. It lost
$24.2 million in the first half of 2017.

The Los Gatos, California, based company has been rumored to be
moving toward an initial public offering (IPO) since July, when
it hired Morgan Stanley and Citigroup as underwriters,
according to
the Wall Street Journal. 

Roku
was expected to move
 toward an IPO in 2014, but it never
materialized. 

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