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Financial News Site: CBS MarketWatch.com Eyes Going Public

Don't blink but the ever-evolving and constantly content driven financial news site CBS MarketWatch.com filed to go public at what our analysis shows could be 18x annualized quarterly sales or an estimated 10x 1999 sales.

The San Francisco-based outfit employs 40 journalists to varying degrees (fulltime to freelance) to produce daily stock market news and commentary and wants to sell a piece of the operation to the public, some 2.75 million shares at a target $11 per share through underwriters led by BT Alex.Brown.

With 11.75 million shares outstanding after the offer, or 13.66 million fully-diluted shares counting options, MarketWatch seeks a $150 million initial market cap. See table here:

CBS MarketWatch proposed
pro forma IPO estimates ticker
Proposed ticker MKTW
Does what? financial news
Shares offered 2.75
Greenshoe 0.41
Target share price $ 11.00
Gross proceeds $ 31.38
Shares outstanding 11.75
IPO market cap $ 129.25
Options/warrants 1.50
Fully-diluted shares (FDS) 13.66
FDS market cap $ 150.29
Working capital $ 22.84
Long-term debt $ -
FDS enterprise value $ 127.45
Quarter ending Sept. 30 revenue $ 1.80
Quarter ending Sept. 30 loss $ (2.54)
Latest quarter annualized $ 7.20
Est. CY99 revenue $ 12.50
   
Valuation metrics  
FDS enterprise/annualized 17.7
FDS market cap/est. CY99 revenue 10.3
   
Page views (October) 48.0
PAGEDEX (FDS marketcap per page view) $ 3.13
Visitors (October) 2.2
WEBDEX (FDS marcap per visitor) $ 68.31
   
Lead underwriter BT Alex.Brown
© 1998 internet.com LLC, isdex.com  
all figures in millions, except share price, multiples  
MarketWatch (the official company name) posted $1.79 million sales and $2.54 million loss for the quarter ending September 30, 1998. The site began as DBC in 1995 and later formed a 50-50 joint venture with CBS for MarketWatch in October, 1997.

CBS kicked in ad time on CBS TV and radio networks now through the year 2002 in exchange for its equity position. The ad value was originally set at $50 million then reduced to $30 million.

After the IPO, both CBS and DBC will own 38% of MarketWatch.com and effectively control it. In addition, CBS gets a piece of all revenue, 6% to 8% (down from 30%).

For October it reported 2.2 million users and 48 million page views and charged a CPM ad rate between $25 and $50, about double what a larger general purpose Web content aggregator may charge. More than 75 firms have advertised on the site including brokerages, financial news sites, and a few consumer goods firms. Four clients made up about half its ad revenue as of year-end 1997.

Risks: the usual suspects--heavy competition from portals, financial magazine Web sites, online services, year 2000 unknowns (bugs in computers systems that may occur as a result of the year "2000" being unrecognized by some computer systems), uncertainty of ad market.

Rewards: CBS MarketWatch has built a widespread offering of financial content with some top-notch writers and editors. Although the revenues lag its distant kissing cousin, CBS Sportline.com, we think MarketWatch may perform somewhat like Sportsline (NASDAQ:SPLN) in terms of growth and stock movement over time.

Finance and sports are amazingly similar content businesses, both stat driven and real-time oriented with huge followings. The real question is if CBS TV and radio can drive people to use MarketWatch, can the 'Eye Network" deliver the eyeballs?

Sportsline, for example, saw spikes in its usage following CBS broadcasting the Olympics and promos pointing to Sportsline.com, but traffic waned afterwards.

Finance sites have similar spikes around big market swings up or down and some tapering off in between. And $30 million ad time may seem like a lot but in the high-rolling world of TV and radio time it's not. Nearly $6 million has already been spent with years to go on the contract.


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