Ancestry.com on IPO Deck (ACOM)

This week we are expecting to see the market absorb the pending initial public offering from Ancestry.com Inc.  The company has a very unique niche and business model in that it operates a subscription-based online research system for family history.  Investors need to be aware that Ancestry.com Inc. is offering 4,074,074 shares and the selling stockholders are offering 3,333,333 shares in the IPO in an expected price range of $12.50 to $14.50 per share.  Ancestry.com will take the stock ticker “ACOM” on NASDAQ, which is the same ticker that was used for the former Agency.com when it was public.

The mid-point of this IPO range comes to $100 million in total proceeds raised, but the 42,402,916 shares outstanding in total after the offering will give the company an implied market cap of more than $572 million.  Morgan Stanley and Bank of America Merrill Lynch are the lead underwriters, and co-managers are listed as Jefferies & Co., Piper Jaffray, and BMO Capital Markets.

The company first operated as The Generations Network, Inc. merged with Generations Holding, Inc. in connection with an investment by Spectrum Equity Investors V, L.P. and certain of its affiliates.  this has the company listed as a predecessor and successor entity.  The total purchase price for the  Spectrum investment was $354.8 million. The total purchase price consisted of $249.1 million of cash, $95.7 million in value of previously owned stock of predecessor, $8.2 million of stock option fair value assumed by the successor and $1.8 million of transaction related expenses. Spectrum and certain of its affiliates currently hold approximately 67% of the outstanding shares of our common stock.

Revenues at Ancestry.com have increased from $122.6 million in 2004 to $197.6 million in 2008.  The books are consolidated now to reflect subscription revenues $133.616 million in the first 9-months of 2008 and $152.506 million in the first 9-months of 2009.  Total revenues for the same periods were $145.158 million and $164.793 million in 2009.  And for the same periods net income was listed as $3.5 million and $12.224 million in 2009.

From what we have seen occur in the subscription business in 2008 to 2009, the question is how much other revenues can be brought in just in case the subscriber revenues start to dry up.  While a free service is unlikely to replace the billions of screened images it claims, it might become easier and easier to put off that family tree research project if the economy does not improve.

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JON C. OGG
NOVEMBER 2, 2009