Looking For a Premium IPO in LogMeIn (LOGM, INTC)

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Calling for the verdict on an IPO ahead of the actual IPO is a tricky business.  So many things can change.  In fact, too many things can change.  Yet, we are hearing a solid book has built has been built up in what is supposed to be tonight’s IPO pricing for LogMeIn.  The IPO is still set at 6.666667 million shares of common stock, and we still have a price range of $14.00 to $16.00 per share.  While nothing is ever solid on the IPO front, the discussions we have had and the reading we have done around the web has this one looking at a premium pricing and/or a premium opening price.

Of the IPO indications, 5,000,000 shares of common stock are coming from the company itself and selling stockholders are offering an additional 1,666,667 shares of common stock.  We don’t want to lead this one too much, but the talk has pointed to a higher number of shares and a premium price.

This one has several things going for it.  First and foremost, Intel Corporation (NASDAQ: INTC) is a 5.43% stakeholder via the Intel Capital arm.  Second, remote monitoring and remote access is a field that is growing.  The third thing this has going for it is that it has been growing internally at a faster clip than many peers.  Lastly, its subscriber tools are very affordable for various customer brackets, and the technology is easy to use.

LogMeIn provides on-demand, remote-connectivity solutions to small and medium-sized businesses, IT service providers and consumers.  It manages computers and other Internet-enabled devices remotely.  The company’s paying customer base grew from approximately 122,000 premium accounts as of March 31, 2008 to approximately 188,000 premium accounts as of March 31, 2009.  Its premium services are sold on a subscription basis at prices ranging from approximately $30.00 to $1,900.00 per year.

During the three months ended March 31, 2009, LogMeIn completed over 120,000 transactions at an average transaction price of approximately $153.00 and generated revenues of $17.2 million, a gain of about 73% compared to $9.9 million in the three months ended March 31, 2008. Its fiscal 2008 revenues were roughly $51.7 million.  The company will have 21,383,301 shares of common stock outstanding after the IPO.

J.P. Morgan and Barclays Capital are the lead underwriters, and co-managers are Thomas Weisel, Piper Jaffray, and RBC Capital Markets.

We noted that the over-allotment option for underwriters was an additional 1 million shares of common stock. It is possible that the additional share count could solely be coming from the over-allotment.  But it is possible that the share count was boosted on strong demand, and then the over-allotment share would be increased by the same percentage.

We have actually seen LogMeIn in use, and for mobile business people that need to access data on the fly this is a major time saver that simplifies business travel.  It is also a perfect solution for remote support and services. Its Ignition product allows you to travel with nothing more than a thumb drive that can be plugged into any computer and allows you to access your own workstation from anywhere with a zero-footprint on the remote PC.

Unfortunately, our regular contact at JPMorgan is out this week and unavailable for comment and we are still waiting to hear back from another contact in the underwriting group on this.

Our own take here is a rather simple one.  Every indication has this as a solid IPO.  We are just shocked that it is coming public this close ahead of the July 4 weekend.  Trading desks are already clearing out at some firms, and many funds and investors are starting to go quiet until after the holiday.

Again, any of this data can change on a moment’s notice.  We have seen it happen on many occasions.  This is a summer IPO on a holiday week and on the heels of one of the best quarters that funds have had in years.

Jon C. Ogg
June 30, 2009