When Rosetta Stone (NYSE: RST) first debuted last year with a 2009 IPO, it was a bit of a blazing star in a collapsing market. Now, the RST stock star has dimmed over a year after the IPO offering, though the company says international growth and a new product could soon have it shining again.
RST’s initial public offering came Apr. 15, 2009, just about a month after major U.S. indexes hit bottom. While a bad time for the market, shares spiked nearly +40% on first day of trading. Initial share offerings of $18 hit $31.67 by May 5 of that year. Now at $18.56, the stock is trading right around its offering price – and a peak to trough flop of about -43%.
Although investor enthusiasm has fallen, what helped give the IPO a boost was that Rosetta Stone was already a readily recognizable name brand in the U.S. With those “easiest and fastest way to learn a language” commercials and consumers reporting, it was exceedingly user-friendly, the stock had serious promise. While RST is up+7.41% in the last five days of trading, that promise is largely abated – and even some company execs seem worried.
Rosetta Stone’s former chief financial officer Brian D. Helman sold 86,792 shares of RST last month at an average price of $17.31 a share. Not a good sign for a company that expects profits to rise, especially considering the price Helman got was less than the original IPO offer price.
Helman left the company in June, and Eichmann announced on July 22 he would step down as well, news that coincided with a stock drop. For investors, two high-profile departures were more than enough to send it downward again. Quarterly sales of $60.6 million missed estimates by +7.5%. The company pointed to weak sales in the U.S., where unit volume fell -16 % from the same quarter last year.
The company is not only struggling in the market, but in the mean streets of marketing as well. Rosetta Stone Inc. recently appealed a judge’s ruling that Google wasn’t infringing on its trademarks by selling the language-software maker’s marks – thus, directing site traffic to rival companies. Rosetta Stone, based in Arlington, Va., claimed that people looking for language products on the world’s largest search engine were being directed to its competitors.
Rosetta Stone’s Chief Executive, Tom Adams, acknowledged the company’s problems in navigating its new Wall Street world, but pointed out good news on the horizon. The company is putting more of a focus on international sales, which rose +155% last quarter. And RST’s new product, Version 4 TOTALe, is set to launch Tuesday, Sept. 14, offering customers live language instruction over the Internet. The kick will be interacting with native speakers online.
It’s a long fall from stock darling to underdog, but if Rosetta Stone keeps shooting for the stars, it may have the chance to regain some of its initial luster once again.
As of this writing, Burke Speaker did not own a position in any of the stocks named here.
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