Cash Infusion Sends TiVo Shares to 6-Month High
A capital infusion for TiVo Inc., a maker of videorecorders that pause and replay live television shows, drove its stock to a six-month high Tuesday.
Shares of the Alviso, Calif.-based company jumped $1.21, or 12%, to $11 on Nasdaq after the firm said it raised $74 million in a secondary stock offering.
Tivo said it sold 8 million shares at $9.30 each -- a 5% discount to Monday’s closing stock price of $9.79. It identified the buyers only as “institutional investors managed by a large investment management firm headquartered in Boston.”
News of a secondary share offering often can push a company’s stock down because of the “dilution” effect -- more shares outstanding dilute the ownership of existing investors and spread earnings over a greater number of shares.
But in TiVo’s case, the capital infusion gives investors more confidence that the company can finance future growth, analysts said.
“In relatively new businesses ... the market rewards companies that are willing to spend money to get subscribers,” said Rodman & Renshaw analyst Daniel Ernst. “TiVo now has the option of rebates, advertising or other methods to acquire subscribers.”
TiVo continues to lose money, but its sales totaled $43 million in its most recent quarter, up 73% from a year earlier.
TiVo went public at $16 a share in 1999. The stock reached a high of $71.50 in 2000, then plunged with the technology-sector crash. It bottomed at $2.55 in 2002.
The stock pulled back again in December on concerns that TiVo could lose one of its largest customers, DirecTV, which was recently taken over by Rupert Murdoch’s News Corp. Murdoch has said in the past that News Corp. expects to eventually offer TV recording services for free.
News Corp. controls NDS, a company that makes technology that competes with TiVo.
TiVo has tried to ease investor concerns, noting that News Corp. and TiVo continue to develop new products, such as the new DirecTV high-definition videorecorder expected to be available soon.
Some analysts have voiced concern that TiVo’s core recorder business could be commoditized by similar, but less extensive services introduced by cable companies.
For now, the capital infusion gives TiVo added validation, said Alan Bezoza, an analyst at Friedman, Billings, Ramsey & Co.: “Somebody’s kicking the tires and came away with something positive.”
Also Tuesday, TiVo said it bought Strangeberry Inc., a Palo Alto-based company that specializes in home network and broadband technologies. TiVo said the acquisition will help it extend its technology beyond digital recording. The companies didn’t reveal terms of the deal.
