Content firm Demand Media shares soar on IPO

28/01/2011

Online content publisher Demand Media went public this week, debuting at a higher-than-expected price of $17 per share. The US-based firm employs a network of more than 13,000 freelancers who produce instructional articles such as "How to Thread a Sewing Machine" and "How to Finish Knitting a Scarf."

Because these articles have a longer shelf life, they can generate ad revenue for a longer period.

Demand Media uses the articles on its website, ehow.com, and sells them to publishers such as USA Today and the San Francisco Chronicle. The initial public offering was greeted enthusiastically by investors as shares surged 35 percent after the IPO raised about $151 million in gross proceeds -- more than twice the $72 million it was expecting.

The shares gained $5.98, or 35 percent, to $22.98 in afternoon trading on the New York Stock Exchange under the ticker "DMD." Earlier, they rose as high as $25.

Demand Media helped boost its results by increasing the size of the offering as well as raising the price of each share.

Earlier Wednesday, it expanded the offering to include 8.9 million shares, up from 7.5 million. It previously expected the shares to price between $14 and $16 apiece.

So far, the approach hasn't led to big profits. The company lost $31 million during the first nine months of 2010, according to a regulatory filing.

Revenue over the same period, however, climbed to $179 million from $143 million in the same nine months the previous year.

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