DigitalGlobe, based in Longmont, Colorado, was formed in 1994 as EarthWatch, according to the prospectus. It changed its name in 2002. The company owns and operates two imagery satellites providing up-to-date and historical earth imagery. This enables its clients to efficiently map, monitor, analyze and navigate the physical world. Among its clients are U.S. and foreign defense departments and intelligence agencies, a wide variety of commercial customers, such as Internet portals and companies in the energy, telecommunications, utility and agricultural industries, including Google Maps and Microsoft Virtual Earth, and mobile devices from Garmin and Nokia.
On Wednesday, May 6, DigitalGlobe reported its Q1 2009 results. The numbers showed a decline. Consider the following:
- The company reported revenues of $106.8 million in 2006; $151.7 million in 2007, and $275.2 million in 2008.
- For the three-month period ended March 31, 2009, DigitalGlobe reported revenues fell to $67.2 million, DOWN 2.4 percent from $68.8 million from the same period a year ago.
- The company reported net income before taxes of $9.9 million in 2006; $37.9 million in 2007, and $91.9 million in 2008.
- For the three-month period ended March 31, DigitalGlobe reported net income before taxes fell to $17.7 million, DOWN 24.7 percent from $23.5 million from the same period a year ago.
When a company reports lower revenues and increased expenses, that usually raises an eyebrow or two. DigitalGlobe’s explanation was outlining its prospectus. It stated:
“In North America, the lower sales were a result of lower sales volumes in both subscriptions and sales of archive imagery. International sales were lower primarily due to a significant one-time sale that occurred in the prior year as well as lower sales of archive imagery.”
“Selling, general and administrative expenses for the three-month period ended March 31, 2009, increased by $4.2 million, or 22.8%, to $22.6 million from $18.4 million for the three-month period ended March 31, 2008. The increase is due to (i) a $1.9 million increase in expenses from payroll, bonus, travel and related costs due to increased headcount, (ii) increased stock compensation expense of $1.1 million resulting from stock option grants made in the first quarter of 2009, (iii) a $0.5 million increase in third-party commission and fees due primarily to a commission earned as a result of the execution of a DAP (Direct Access Program) contract, (iv) $0.6 million increase for bad debt expense and (v) a $0.1 million decrease in marketing expense due to the timing of trade shows.”
That’ll do it.
DigitalGlobe expects to price 14.7 million shares at $16 to $18 each on Wednesday evening, May 13. The deal is expected to raise $250 million.
The company plans to offer 1.37 million shares and selling shareholders plan to offer 13.33 million shares.
The prospectus reports that there will be about 74 selling shareholders. And, for whatever reason, some are completely liquidating their holdings. Among those reported names were:
- Ball Technologies Holdings plans to offer all of its 2.79-million-share investment.
- OZ Management plans to offer all of its 1.11-million- share investment.
- The Bond Fund of America plans to offer all of its 796,807-share investment.
- Telespazio S.P.A. plans to offer all of its 796,640-share investment.
The deal is expected to start trading Thursday morning, May 14, on the New York Stock Exchange.
Last Week’s Passing Parade
Dateline: HONG KONG
Last week’s billion-dollar IPO flopped. China Zhongwang Holdings (1333.hk) started trading on Thursday, May 7, at HK$6.80, below its initial offering price of HK$7 per share, and closed the week at HK$6.63, DOWN 5.3 percent from its offering price.
The deal was priced on the low end of its HK$6.80 to HK$8 filing range, which indicated a lack of demand. As one U.S. hedge fund manager once said, “All you need to know about an IPO (its aftermarket trading) is in its pricing.”
It’s the same the world over.