Rosetta Stone Holders Unloading Stock (RST)

Rosetta Stone Inc. (NYSE: RST) has just filed with the SEC for a public offering of common stock.  The language learning software leader filed to sell some 4,697,750 shares, which it listed as being worth approximately $138,959,445.  Technically, this is 4.085 million shares and the rest is an overallotment.  Be advised here that the company is receiving essentially none of the proceeds which are going to the backers.

Rosetta is selling 40,000 shares of stock, although that may be just to cover expenses.  Lead underwriters are Morgan Stanley and William Blair.  Co-Managers and other underwriters are Jefferies, Piper Jaffray, R.W. Baird, and Lazard.

The use of proceeds does confirm that Rosetta intend to use the proceeds received from this offering primarily to fund the expenses of this offering.  It does not anticipate having significant net proceeds remaining after the underwriting discounts and commissions are deducted with respect to the shares it sells and after the estimated offering expenses.  Rosetta will not receive any proceeds from the sale of shares of our common stock by the selling stockholders.

The two key sellers are listed as ABS Capital Partners (entities tied to it) and Norwest Equity Partners (entities tied to it).  The ABS stake, assuming no overallotment is taken, will go from 25.1% to 13.2%.  the Norwest stake, assuming no overallotment, will got from 16.4% to 8.6%.

As far as how this fits in with the overall capitalization and float, Rosetta noted that its authorized capital stock consists of 190,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock. As of June 30, 2009, the company had outstanding 20,342,252 shares of common stock and noted that it had 765 common stockholders of record.

Rosetta closed up0.17% at $29.91 and shares are down only 2.2% at $29.25 on the news.  Its post-IPO range is $21.33 to $32.97.

FULL SEC FILING

JON C. OGG