Sonos to Raise Up to $264 Million in Initial Public Offering

(Bloomberg) -- Sonos Inc., the wireless speaker pioneer taking on Amazon.com Inc., Google and Apple Inc., plans to raise as much as $264.1 million in its upcoming initial public offering.

While the wireless speakers market is booming -- Sonos says its customers listen to about 70 hours of content a month -- competition has increased since the company introduced its first home-audio system in 2005. Sonos, which has traditionally marketed its sleek, high-end speakers to audiophiles who prize sound quality, cited an “extremely competitive and rapidly evolving” market among risk factors in its IPO.

The Santa Barbara, California-based company is selling 13.9 million shares at a price of $17 to $19 a share, it said in a regulatory filing Monday. The underwriters have been given the right to buy an additional 2.08 million shares to cover any over-allotment.

The total market valuation of Sonos at $19 a share would be $1.87 billion. Sonos was targeting a valuation of $2.5 billion to $3 billion in the IPO, people familiar with the matter said in April. The company and has been led by Patrick Spence since January 2017, and its products are now in about 7 million households worldwide.

The rise of Sonos, founded in 2002, was hit by the launch of Echo, Amazon’s voice-controlled speaker, in late 2014. Months earlier, Sonos executives were telling employees and the public that it would cross $1 billion in revenue for the first time in 2015.

In fiscal 2017, the company posted a net loss of $14.2 million on revenue of $992.5 million, down from a net loss of $38.2 million on $901.3 million of revenue in the previous financial year, according to a filing. The latest figures are more positive. Sonos posted revenues of $655.7 million in the six months ended March 31, 2018. The company also swung to a profit, with net income for the same period reached just $13.1 million.

To match its competitors, Sonos is switching its product line to voice-activated speakers. It launched its first such home theater product -- the Sonos Beam -- in July, following the launch of the Sonos One in October last year.

Despite competing with Amazon, Sonos relies heavily on its technology. In its IPO document, Sonos flagged that both these products use Amazon’s Alexa system, and that its current agreement allows the e-commerce giant to disable its digital assistant’s integration with limited notice. Sonos also uses Amazon Web Services, or AWS, to connect its mobile app to servers and other streaming platforms.

Sonos said it’s working to strike deals with other companies that have developed voice-control technology. Its products now support Apple’s AirPlay 2 wireless music-streaming system, and Google’s Assistant.

Sonos’s largest investor is KKR & Co., which owned an almost 26 percent stake as of June 30, according to the filing. Its next largest holders are Index Ventures, which owns about 13 percent, and Sonos co-founder John MacFarlane, who owns about 10 percent.

Morgan Stanley, Goldman Sachs Group Inc. and Allen & Co. are working on the listing.

©2018 Bloomberg L.P.