Demand Media Clears IPO Hurdle

Demand Media has cleared the hurdle in front of it set by the SEC, and is on track to go public sometime this year, according to AllThingsD. The SEC questioned Demand Media over how it recognizes expenses for content. Most publishing companies recognize costs immediately, but Demand Media spreads it out over five years, due to the nature of the content, according to the company. Demand Media expects to price the shares from $14 to $16, and Goldman Sachs and Morgan Stanley are leading the underwriting. The company could sell as many as 8.625 million shares, 4.5 million shares from the company, three million shares from existing shareholders and another 1.125 shares that its underwriters have an option to sell. It will trade under the ticker symbol DMD on the New York Stock Exchange. The company did file an amended prospectus with regards to how it recognizes expenses. In the filing, the company said, "Changes from the five year useful life we currently use to amortize our capitalized content would have a significant impact on our financial statements. For example, if underlying assumptions were to change such that our estimate of the weighted average useful life of our media content was higher by one year from January 1, 2010, our net loss would decrease by approximately $1.6 million for the nine months ended September 30, 2010, and would increase by approximately $2.4 million should the weighted average useful life be reduced by one year."