Another Former $2-Billion Startup Gets Rolled Up

Investors who bought the hype are left holding the bag.
Ad-buying software company Rocket Fuel – ‘a predictive marketing platform,’ it calls itself – announced on Tuesday that it was acquired for $2.60 a share. Including the assumption of debt, it makes for a deal value of $145 million. Down from $2 billion at its peak one month after the IPO.
The Silicon Valley startup went public in September 2013 at $29 a share. Its shares soared 93% on their first day, closing at $56.10. A month later, shares hit $66.43, which gave the company its peak market value of about $2 billion.
This was the period when ‘ad tech’ was the latest Silicon Valley fad that sucked billions of dollars out of investors’ pockets – much like ‘fin tech’ these days. Not much later, reality began to set in and shares headed south. The company lost money relentlessly. In 2015, the layoffs started. The whole sector crashed to reality. Today, after the buyout offer, its shares trade at $2.64, or 91% below the IPO price, and 96% below their peak.
Rocket Fuel is being acquired by Sizmek Inc., a previously public company once known as Digital Generation that itself was acquired in August last year by private equity firm Vector Capital for $122 million. Over the past two years, Sizmek has been busy acquiring ad tech firms, and now with Vector Capital’s backing, it adds another one. This is turning into a rollup.

This post was published at Wolf Street on Jul 19, 2017.