The Information is tipping Vimeo as being a possible acquisition target. Barry Diller’s listed IAC group has a track record of successful spin-offs, including Expedia, Ticketmaster, and Match but “Vimeo, its latest, hasn’t exactly shared their fate. Since its May separation from IAC, the video software firm’s stock has plummeted 77%”. The company’s market cap has shrunk to just $2.1bn, reflecting a slowdown in spending by small businesses that had ramped up their use of Vimeo during the pandemic.
It says: “Vimeo’s management is trying to turn things around. But at its current price, Vimeo may also be attractive to buyers, which could include a private equity firm or another tech firm, such as Salesforce or Microsoft’s LinkedIn. Salesforce could use Vimeo to bolster its video-service capabilities, for instance. Thrive Capital, Josh Kushner’s venture capital firm, may be a fan of looking for a buyer given that it bought into Vimeo in late 2020 at a price that’s roughly 25% above where Vimeo stock is now trading.”
The Information says Vimeo shares are currently trading at just four times next year’s revenue, according to Koyfin. “Other enterprise software stocks that are growing at a similar rate to Vimeo are trading at a multiple of six times. But Vimeo generates little in the way of cash, which is what investors are focusing on more nowadays. That doesn’t suggest the stock is undervalued.”
Vimeo raised money in the year before IPO from investors including Thrive and the Government of Singapore Investment Corp., which paid the equivalent of $17.08 a share when they invested $150m in the company in November 2020. Two months later, T. Rowe Price Associates and Oberndorf Enterprises invested $100m in Vimeo at a price of $34.85 per share. Vimeo shares on Wednesday closed at $12.85.
Vimeo started life as a smaller competitor to YouTube. But it shifted the focus away from video streaming a few years ago toward selling subscriptions to its cloud-based video software. It offers a basic free service and paid subscriptions for individuals as well as enterprise plans that allow companies to have a plan for streaming events and company meetings, creating internal training videos and creating and publishing marketing videos. Customers include Coca-Cola, Planet Fitness, and CarMax, according to a Vimeo press release.
