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Rosetta Stone to Go Public, Ending IPO Dry Spell

By Mike Musgrove
Washington Post Staff Writer
Thursday, April 2, 2009

Rosetta Stone, an Arlington-based language instruction company, plans to file an initial public offering this month, according to a filing with the Securities and Exchange Commission. It would be the first venture-capital-based IPO in six months.

The firm could raise as much as $106.3 million under its plan to offer 6,250,000 shares of common stock priced between $15 and $17 per share.

According to the company's recent filing with the SEC, Rosetta plans to grow its business with new types of Web-based language instruction services. The company also hopes to expand its sales overseas and attract more corporate clients by offering industry-specific language training.

Executives were not available for comment yesterday, as the company is in a quiet period. Until the SEC declares Rosetta's registration statement effective, federal securities laws limit what information the company can release to the public.

Rosetta is today one of the most widely recognized names in the language instruction market, and its fortunes have been on the rise. The company's profit increased to $13.9 million last year from $2.58 million in 2007, according to the IPO filing. Revenue was $209.4 million in 2008, up from $137.3 million the year before.

Initial public offerings have become something of a rarity due to an erosion of investor confidence. The National Venture Capital Association and research firm Thomson Reuters yesterday released a report saying there have been no venture capital-based IPOs since October.

The most recent Washington area company to go public, the Bethesda-based real estate investment trust American Capital Agency, filed its IPO on April 15 last year. The firm initially sold 10 million shares at $20 per share a year ago, and its stock closed at $16.92 yesterday.

Though Rosetta makes its products available through retailers such as Apple, Barnes & Noble and Borders, the company makes most of its sales through direct-to-consumer channels, such as airport kiosks.

Founded in 1992 as Fairfield Language Technologies, Rosetta offers instruction in 31 languages, from Arabic to Welsh.

The company's stock, if all goes according to plan, will trade on the New York Stock Exchange under the symbol RST. The sale is being handled by five firms, including William Blair & Co. and Morgan Stanley.

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