Fast-growing Millennial Media Inc., a Baltimore-based mobile advertising company, sold shares to the public Thursday, breaking a years-long IPO drought in the city's technology sector. It ended the day valued at $1.87 billion.
The company's CEO, Paul Palmieri, rang the opening bell at the New York Stock Exchange. Shares immediately shot up to $25 in early trading, nearly double the initial opening price of $13. The stock ended the day at $25 after peaking at $27.90 in the morning.
Palmieri and co-founder Chris Brandenburg became millionaires, at least on paper. Palmieri's stock holdings were valued at $185 million, Brandenburg's at $150 million.
Palmieri sold $5.1 million worth of shares with the IPO, while Brandenburg sold $4.2 million worth, according to SEC documents.
Later in the day, Palmieri and other executives took a flight back to Baltimore, where they were greeted outside company headquarters by more than 150 cheering employees.
"Today is another step forward in the rapid growth we have experienced over the last six-plus years," Palmieri told The Baltimore Sun. "We're excited and proud to celebrate this milestone with our employees, customers, partners, neighbors and the entire Baltimore community, without whom this would not be possible."
A jubilant Brandenburg cheered with employees and shouted: "Who wants drinks? We're buying!"
Millennial is the first of a new breed of companies to go public that target the booming mobile advertising sector. Palmieri, a former Verizon Wireless executive, and Brandenburg, a former Advertising.com executive, own 11.3 percent and 9.2 percent, respectively, of the company.
Some of Millennial's competitors have been snapped up by Google Inc. and Apple Inc. for hundreds of millions of dollars.
But Millennial decided to go it alone — and go for an IPO. The wind appears to be at their backs, for now.
Skyrocketing sales of smartphones and tablets worldwide have led analysts to project a rosy outlook for the mobile advertising market in coming years, as companies shift their ad budgets to target mobile users. The market is expected to grow sixfold to more than $20 billion by 2015, according to Gartner, an industry research firm.
The climate for technology IPOs appears to be warming up, after going through a years-long lull since the dotcom bubble burst in the early 2000s. Last year, Groupon, Zynga, Pandora and LinkedIn — some of the biggest brands on the Internet — went public.
CafePress, a popular website that sells custom-designed apparel and other items, also went public Thursday. And Facebook is expected to launch an IPO in May that could raise $10 billion and value the social networking giant at $100 billion.
The Millennial IPO was hailed by local business leaders, who see Millennial swelling into a larger company that will lure talented workers to the Baltimore area and fuel the formation of new businesses. A similar effect was seen with the growth of Advertising.com, which was bought for $435 million by AOL. Some of that firm's employees have formed new ventures, and several others have gone to work for Millennial.
Millennial was a member of the Emerging Technology Center, a business incubator in Canton. The company is still based in Canton, near the incubator.
"I think that someday we will look back at this particular period in time and realize that this was when Baltimore shed its self-imposed inferiority complex and became comfortable in its own skin," said Jason Hardebeck, executive director of the Greater Baltimore Technology Council, a networking association for the region's tech firms.
"We don't need to be the next Silicon Valley anymore; we already have a head start on being the next Baltimore," Hardebeck said.
Millennial, which trades under the ticker symbol: MM, expects to raise more than $132 million from the stock sale, with most going to the company and a small amount going to individual investors who participated in the stock sale. Company officials have said they plan to use the new capital to expand the company's reach in the United States and abroad, invest in new technologies, and hire more employees.
The company was formed in 2006 and had raised $65 million in investment from venture capital firms.
According to its registration statement with the Securities and Exchange Commission, Millennial has not turned a profit. But losses have narrowed significantly in recent years. In 2010, it had a loss of $7.1 million; last year, Millennial posted a $287,000 loss, according to an SEC filing.
Google and Apple are Millennial's main competitors. Google acquired AdMob, a leading mobile advertising company, in the spring of 2010 for $750 million. Apple acquired another of Millennial's competitors, Quattro Wireless, several months earlier for $275 million.
"They [Millennial] really are involved in the heart of a big change in advertising in America," said Douglas M. Schmidt, CEO of Chessiecap, a Bethesda banking and venture firm. "There's a lot of potential there."