BizNomic

The internet phone company, with a registered user base of 560 million has finally decided to go public. The Luxembourg based company intends to offer American Depository Shares on the Nasdaq Index and raise up to USD 100 million through its initial public offering.

As per reports, the company has already filed an S1 with the Securities and Exchange Commission; however, the price and the number of shares are not yet known.

Goldman Sachs, JP Morgan Securities and Morgan Stanley are the joint book–running managers for the IPO. Lazard, RBC Capital Markets and UBS Securities along with Allen & Company and The Evercore Group will be acting as the co-managers for the public offering.

As per the regulatory filing, Skype earned revenues of USD 406 million for the 6 months ended June, 2010. It reported a net income of USD 13.1 million and USD 1.4 million as net income from operations. In the past one year Skype reported 95 billion minutes of combined usage for voice and video calls. The company reports also revealed that only 8.1 million of the total user base subscribed to the paid services offered on the website.

Skype was founded in 2002 by Niklas Zennström and Janus Friis. The company offers free communication via video, voice and text messaging through any device that supports the internet. In 2005, the company was taken over by internet giant, eBay, in a deal worth USD 2.6 billion. Out of this amount USD 1.3 billion was paid in cash and remaining was paid through 32.4 million shares of eBay. In November, 2009, eBay divested a 70 percent stake within the company in favour of an investor consortium for a value of USD 1.9 billion in cash and a principal note from the buyer for USD 125 million. The investment consortium was led by Silver Lake and also comprised of Joltid Limited, Canada Pension Plan Investment Board and Andreessen Horowitz.

The deal where eBay divested 70 percent stake was announced in September, 2009 and as per the terms of the original agreement eBay had signed a definitive agreement to divest 65 percent stake in favour of the investor consortium comprising of Silver Lake, Index Ventures, Andreessen Horowitz and the Canada Pension Plan Investment Board. Later, the founders of the company, Niklas Zennström and Janus Friis, who had retained the rights to the technology behind Skype, filed a suit against eBay, stating that the company had modified the source code, made unauthorised modifications and disclosed the software to third persons.

These allegations created a road block for the deal that was signed by eBay to divest a 65 percent stake. In November 2009, the founders agreed to withdraw the law suit in return for a 14 percent stake in the company and two seats on its board. They also agreed to transfer the intellectual property to Skype SA. This agreement modified the original agreement such that, the investor consortium would hold 56 percent stake in the company, the founders were given a 14 percent stake and eBay with held a 30 percent stake in the company.

Later, reports also revealed that Skype paid close to USD 344 million to settle the dispute with the founders and also invested USD 6 million in Rdio, a social music service founded by them.

Skype has 124 million connected users today and is already a profit making company. The IPO will only help the company to avert losses, as a result of the huge expenditure that it had incurred to settle the dispute with the founders in 2009.