Epic Ventures
 

Sep 28, 2006

IPO Gives 15 Percent Hike to Shares at DivX

Mike Freeman, The San Diego Union-Tribune

San Diego, CA


DivX, a San Diego maker of video compression software, got a good start on its first day as a publicly traded company yesterday as its shares jumped nearly 17 percent.

 
The firm, whose technology allows large video files to be delivered over the Internet, saw its shares open at $16 -- above its forcast range -- and end the day up $2.70 at $18.70 on the Nasdaq exchange.
 
While DivX's stock gains might have been considered mediocre during the tech boom years, they're positive given the weak appetite of investors today for new tech stocks.
 
Financial services and energy firms have been the most popular IPOs this year, according to analysts.
 
"There's been a little bit of a drought in tech IPOs," said Rich Peterson, an analyst with Thompson Financial in New York.  "so when one debuts, there's some pent-up demand from fund managers."
 
DivX wasn't the only tech firm having a strong debut this week. On Thursday, San Francisco-based Riverbed Technology saw its newly minted shares climb 48 percent.  And CommVault Systems of Oceanport, N.J., gained 17 percent yesterday on its first day of trading.
 
Phil Stiller, an analyst with Greenwich, Conn.-based Renaissance Capital, said DivX was attractive to investors because of its potential growth.
 
"They have a pretty nice licensing business with DVD" manufacturers, said Stiller.  "There's still room to grow that business in the U.S. and in Asia."
 
DivX's video compression software also is one of the better performing technologies for delivering large video over the Internet, said Stiller. 
"DivX might be able to leverage that technology by joining with a larger partner for movie distribution," said Stiller, adding that such a deal would be a "home run."
 
The company was founded in 2000 by Jerome Rota, a French engineer, and R. Jordan Greenhall, a former MP3.com executive.  DivX is housed in the former offices of the defunct Internet music firm.
 

At least on paper, Greenhall, the company's chairman and chief executive, had a good day.  Shares he owns directly, are owned by family members or are held in trusts he controls were valued at $52.5 million based on yesterday's closing prices, according to filings with the U.S. Securities and Exchange Commission.

A call to DivX headquarters was not returned.

DivX distributes its software over the Internet and makes the bulk of its money through license fees charged to DVD makers and other hardware companies, including Philips Electronics and Samsung.

The venture-backed company has raised $38.4 million since its inception.

Investors include Zone Ventures, WI Harper and Insight Venture Partners.

DivX has been increasing its sales.  Revneue rose to $33 million last year, up from $16.4 million the year before.  The company earned $2.3 million last year, compared with a $4.3 million loss in 2004.

The company raised $145.6 million in the stock sale.  In a fling with federal regulators, it said it would use the proceeds for general corporate purposes.

The ticker symbol is DIVX.