Rosetta Stone

How was the Rosetta pricing?

25 times oversubscribed. Proposed 15-17 per share. Sold 30% of company. eV/EBITDA of 8x. Most asked to max out their allocation. Good response due to no emergence of real competitor with similar service and great growth potential within language learning market.

What were the prerequisites for an IPO?

A credible business plan, a qualified mgmt team, create outside board, prepare audited financials, performance measures, and projections, develop reltaionships with bankers, lawyers, and accoutants.

How did Rosetta Stone get started?

Allen Stolzfus, an econ professor, envisioned using computer technology to simulate the way ppl learn their native language with pictures and sounds. Him and brother in law John Fairfield explored concept of how a computer could be made to facilitate language learning. They founded Fairfield Language Technologies in VA 1992. Emergence of CD Rom technology in 1990's made the project possible.

What did Rossetta Studio do?

Allowed each Rossetta Stone learner time to schedule a chat with other learners and with a native speaking coach to facilitate language practice.

What was the function of the underwriter?

Analyst research support, distribution capabilities, and after market market making support

What were the comps for Rosetta?

Apollo, Career Education, K12, EA, Adobe, New Orienteal

Who was the biggest competitor?

Berlitz, similar methods to dynamic immersion but used in person centers. Products included Live Mocha, Babilea, and Palabea.

What did Rosetta World do?

Connected virtual community of language learners to practice their skills thru a collection of games and other dynamic conversation opportunities.

What were the reasons for Rosetta doing an IPO?

Exit opp for Pe firms, expand products and markets, and IPO market began to recover, Changyou.com just went public

What happened in 1999?

First retail language training product released under the name Rosetta Stone. The CD ROm used effective way of learning new languages called Dynamic Immersion. Language test scores of those who had completed 55 hrs of Rosetta training performed comparably to those who had completed an entire semester of a good quality college language course.

What is syndicate?

Group of IBs that agree to buy portions of offering at the offer price less the underwriting discount.

What happened during Tom Adam's reign as CEO?

He entered new markets and scaled the business, grew revenue at 70% CAGr and EBIT at 98% from 2006 to 2009. Company name changed to Rossetta Stone to match name of signature product. Became most recognizable language learning software brand in the world. Expanded its product line by increasing the # of languages and levels offered and broadened the language leanring experience by introducing Rossetta Studio and Rosseta World.

What was the function of the attorney?

In house counsel, handling SEC disclosure, and "corporate cleanup", making adjustments to contracts.

What were issues surrounding the IPO?

In middle of great recession, economists and businessmen disagreed about future economic prospects, lots of competitors and substitutes, and threat that APPL and MSFT would enter the mkt

What is the function of the auditor?

Making sure company's financials in compliance with accounting standards. Issuing "comfort letter"

What did Dynamic Immersion consist of?

Models how natives learn their language thru computer simulation. Dynamic: Matches images with spoken word Immersion: Start at beginning and study solely in the new language.

What was the offering settlement?

Occurred 7-10 days after effective date, firm delivered security certificates to underwriters and lead underwriter delivered proceeds to the firm. Following the offering, the lead underwriter provided IB services, distributed research literature, and acted as market maker for the company.

What did the road show consist of?

Preliminary price range set. Underwriters that were issuing firm's securities present deal to institutional investors, build book of purchase orders.

What is the timeline of IPO process?

Prior to day 1: organizational "all hands" meeting. Day 1-14 Quiet period 15-44 Due dilgigence 45 Registration announcement 45-75 SEC Review 76-89 Letter of comment from SEC and road show 90-91 shares are offered and trading begins 98 Settlement

What was the function of PR?

Responsible for keeping down advertising during quiet period, organize road shows to promote IPO.

What did the SEC review process consist of?

SEc auditor reviews registration statement for compliance with SEC regulation. Underwriter forms syndicate and starts road show

What was the 2009 situation?

Steady customer base, 24 languages, strong brand7x bigger than any other language software in US, positive profit in 08

What happened in 2002?

Stolzfus died and Tom Adams was hired as CEO who brought an international dimension to the company.

What was the due dilgence process?

Underwriter interviews mgmt, suppliers, customers, reviews financials, drafts preliminary registration statement. Confirm nothing in registration statement is significantly untrue or misleading