Roku Sets Its IPO Price at $14 a Share

In this MarketFoolery podcast segment, host Chris Hill and Stock Advisor Canada's Taylor Muckerman discuss the soon-to-be public Roku, maker of its eponymous line of digital media player set-top boxes. They're capitalizing on the cord-cutting trend, and people who use them love them. The question, though, is whether that's enough to allow the company to compete in a saturated space filled with better-financed giants.

A full transcript follows the video.

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This video was recorded on Sept. 18, 2017.

Chris Hill: Roku, which is the video streaming business, has set the price for their upcoming public offering at $14 a share, and they're looking to raise about $250 million. They could use that, because Roku is not yet profitable. I'm curious if you have any thoughts about this business, because it really does seem like, unfortunately for Roku, they appear to have a product where people who use it like it a great deal, but not the greatest business model in the world to support that product.

Taylor Muckerman: Yeah. I wish we had J-Mo [Jason Moser] in here, because he's kind of hinted at his feelings about it in the past. Kind of a one-trick pony, especially when you're comparing it to Amazon Fire Stick, clearly not Amazon's thoroughbred, but it's something that they're selling at a very reasonable price, and very similar offerings to Roku. Then you have the Google Chromecast, Apple TV, Xbox and PlayStation are doing very similar things. So it makes me a little nervous. Needless to say, I will not be investing in a Roku IPO, or any time down the road, at least from what I've seen so far.

Hill: I love the chutzpah. I just love the foresight to say, "Cable cutting is real, more people are going to cut the cord, we're going to start a business that goes in the direction that we think people are going in." That's great. And also, the chutzpah to say, "Yeah, Apple, Amazon, and Google, bring it on!"

Muckerman: Microsoft, Sony, everybody. [laughs]

Hill: Bring it on! And maybe that is part of someone's thesis for buying into this IPO. Hey, Roku does make something people like, and maybe they become a buyout candidate as a result of that. That being said, more often than not, when we ask the question, "Is the prospect of Company X being bought by someone else a reason to buy the stock?" the answer is either no or, it really shouldn't be No. 1 on your list.

Muckerman: Yeah, that's far too much speculation for me.

Hill: By the way, the Industry Focus podcast, the Friday edition where they talk about Technology, Sept. 8, Dylan Lewis did a deep dive on the Roku IPO. A lot of good information there. And they're going to be doing a follow-up episode after it goes public. Check that out if you want to go a little deeper on Roku's IPO. That's the Sept. 8 episode. And his guest, Evan Niu, one of our contributors here at the Fool -- I'll just tell you, Evan has a cold for that episode, so there's some sniffling that goes on. Just hang in there. All the information is worth it, I promise.

Muckerman: Did Roku make him sick? [laughs]

Hill: No, I don't think so.

Muckerman: Was it the IPO's fault?

Hill: [laughs] It definitely was not.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Chris Hill owns shares of Amazon. Taylor Muckerman owns shares of Alphabet (C shares) and Amazon. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Apple. The Motley Fool has a disclosure policy.