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Vizio stock sputters in trading debut as IPO market appears to cool

Vizio Holding Corp. shares opened below their initial-public-offering price Thursday afternoon in a sign that the once-hot IPO market could be cooling.

Shares of the company, which makes smart television sets and TV sound bars, opened at $17.50, with the first trade coming at 12:53 p.m. ET. They recently changed hands just above $18, roughly 13% below the company’s initial public offering price of $21 a share. That pricing came at the low end of Vizio’s expected range of $21 to $23 a share.

Vizio
VZIO,
-13.81%

raised about $159 million through the offering.

Vizio made 7.56 million shares available through the offering, while selling shareholders offered 4.69 million shares. The selling shareholders had been planning to offer 7.56 million shares according to a March 16 release. The underwriters have a 30-day option to purchase up to 1.84 million additional shares from selling shareholders at the IPO price, down from up to 2.27 million that was expected as of the March 16 release.

Chief Financial Officer Adam Townsend told MarketWatch that the company, which has been in the market for nearly two decades, decided to conduct its IPO now because it “is at an inflection point and aligned with shifts that are going on in the consumer marketplace,” such as growing engagement with streaming-TV services and the rise of digital advertising.

Vizio generated $2.04 billion in revenue during 2020, up from $1.77 billion a year earlier, with $1.90 billion of the most recent revenue total coming from device sales. The company also has a platform business, including advertising tools on its smart-TV operating system, which is much smaller but growing more quickly. Vizio recorded $147 million in revenue from its platform business last year, up from $63 million in 2019.

“While our Smart TVs and sound bars continue to generate the majority of our total net revenue, we believe our advertising products offer the largest opportunity to profitably grow our business,” the company said in its prospectus. “We intend to significantly invest in expanding our advertising capabilities further accelerating the secular shift to connected TV advertising.”

Vizio expects that the platform business, while smaller in terms of revenue, will make up the “bulk of our gross-profit dollars in the near future” and that the high margins of the platform offering will enable the company to invest more in its hardware business, Townsend told MarketWatch.

He argued that consumers “don’t mind advertising” as long as it’s relevant to them, while advertisers are looking for new ways to connect with viewers as television consumption moves away from linear forms.

The company saw net income of $102 million in 2020, up from $23 million in 2019.

Vizio reported 7.1 million smart-TV shipments in 2020, up from 5.9 million in 2019. It had 12.2 million active accounts using its SmartCast operating system as of the end of 2020, up from 7.6 million at the end of 2019.

The company sees opportunities to grow smart-TV sales, increase the awareness and adoption of SmartCast, and drive heightened user engagement, which could help grow the average revenue per use for SmartCast.

While Vizio had been seeing growing interest in TV sound bars “for a while,” Townsend said that the company “certainly saw demand rise during the pandemic” as people sought to upgrade their houses with equipment that could create a home-theater experience. He expects continued growth given Vizio’s product expansion, including into into high-end devices that include Dolby Atmos sound.

Overall, Vizio said in its prospectus that it saw “a net positive impact on consumer demand for our products” in 2020, though like many other electronics makers, the company was impacted by supply constraints.

The IPO comes as the Renaissance IPO ETF
IPO,
+0.10%

has gained 134% over the past 12 months and as the S&P 500
SPX,
-0.05%

has risen 57% in that span.

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