FriendFinder Networks Announces $50+ Million IPO

BOCA RATON, Fla.—FriendFinder Networks (FFN), the Florida-based parent company of Penthouse and Adult FriendFinder has filed papers with the Securities and Exchange Commission (SEC) announcing its intent to seek an initial public offering (IPO) of shares of common stock worth between $50-$57 million.

Approximate date of commencement of sale to the public is proposed to be as soon as practicable after the effective date of the registration statement, which was filed with the SEC April 27. Bloomberg anticipates May 11 as the date that shares will price. The underwriters who will deliver the shares to investors in New York City are Imperial Capital Group Inc. of Los Angeles and Ladenburg Thalmann Financial Services Inc. (LTS) of Miami.

“Prior to this offering, there has been no public market for our common stock,” the statement reads. “It is currently estimated that the initial public offering price per share will be between $10 and $12. We have applied to have our common stock listed on the Nasdaq Global Market under the symbol “FFN.” Upon consummation of this offering, assuming an offering of 5,000,000 shares, our executive officers, directors, and principal stockholders will own approximately 75 percent of our issued and outstanding common stock.”

The statement further states that all of the net proceeds from the offering will be used to repay a portion of the company’s outstanding debt. The current offering compares with a $240 million IPO postponed by FriendFinder last year in which it planned to sell 20 million shares at $10 to $12 each. At the time, the company said it was putting off the IPO until market conditions improved.

“As of December 31, 2010,” it continues, “we had $305.0 million of New First Lien Notes and $13.8 million of Cash Pay Second Lien Notes outstanding. The New First Lien Notes and Cash Pay Second Lien Notes have a stated maturity date of September 30, 2013. Interest on the New First Lien Notes and Cash Pay Second Lien Notes accrues at a rate per annum equal to 14 percent. As of December 31, 2010, there was no accrued and unpaid interest on the New First Lien Notes and Cash Pay Second Lien Notes.”

The company anticipates that net proceeds from the IPO will be $49.4 million, or $57 million “if the underwriters exercise their option to purchase additional shares in full. “Net proceeds” is what we expect to receive after paying the underwriters’ discounts and commissions and other expenses of the offering. For purposes of estimating net proceeds, we are assuming that the public offering price will be the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus, which is $11 per share.”

The company’s revenue for 2010 was reported to be $346 million, with a net loss of $43.2 million. According to the filed statement, the company’s reach in its market is vast.

“Our business consists of creating and operating technology platforms which run several of the most heavily visited websites in the world,” it reads, “Through our extensive network of more than 38,000 websites, since our inception, we have built a base of more than 445 million registrants and more than 298 million members in more than 200 countries. We are able to create and maintain, in a cost-effective manner, websites intended to appeal to users of diverse cultures and interest groups. In December 2010, we had more than 196 million unique visitors to our network of websites, according to comScore.”

Competitive strengths listed in the statement include a proprietary and scalable technology platform, a paid subscriber-based business model, a large and diverse user base and a large and difficult to replicate affiliate network and significant marketing spend.

Of the latter point, the company said, “We believe that the difficulty in building an affiliate network of this large size, together with our combined affiliate and advertising spend of approximately $103.5 million for the year ended December 31, 2010, presents a significant barrier to entry for potential competitors.”

In terms of its strategy going forward to enhance revenue opportunities, the company said it plans to convert visitors, registrants and members into subscribers or paid users, create additional websites and diversify offerings, expand into and monetize current foreign markets, pursue targeted acquisitions and generate online advertising revenue.

The filed SEC statement can be read here.