Counting Angry Birds before they hatch: dev talks US IPO, analysts need track record

Angry Birds developer Rovio has been on a roll: raking in millions of unit sales, breaking through to the mainstream and recently receiving another $42 million from investors. Now the company is talking about going public on the Nasdaq with an IPO in the next five years.

"At an estimated value of nearly $300 million, it would still be considered a relatively small company," EEDAR's Jesse Divnich explained when we asked about the company's chances. "Gameloft, for example has a current market cap of $344 million (the cost for someone to own every share of the company), this is compared to Activsion which has a market valuation of over $12 billion, and Google at $185 billion. In fact, most large mutual funds typically don't invest in anything with a market cap under $1 billion. If they do, they typically classify them as 'high-risk' or 'aggressive plays.'"

Wedbush Morgan's Michael Pachter had similar reservations about the company telling Joystiq, "Any company can go public, but the rule of thumb is that the company has at least $50 million of annual revenue before they try to sell stock. That revenue has to be recurring, and I think that is an obstacle for Rovio, which so far is a one-hit wonder. If they can replicate what they've done with Angry Birds, there might be some interest."

Pachter also mentioned that the administrative costs of being public is about $5 million annually, which is why small companies don't usually take the stock route.