Will Gore's clout make Current Media's IPO sizzle?

By Lilla Zuill

NEW YORK, Feb 1 (Reuters) - Al Gore, the former U.S. vice president turned environmental activist, has collected a dizzying number of titles and awards including a Nobel Peace Prize and starring in an an Oscar-winning documentary on global warming.

He is also sporting a growing number of corporate hats including senior adviser to Google (GOOG.O: Quote, Profile, Research), a seat on Apple Inc's (AAPL.O: Quote, Profile, Research) board, partner at Silicon Valley investment firm Kleiner Perkins and chairman of Generation Investment Management, which is focused on "sustainable" investments.

Now Gore is banking on a Wall Street welcome for Current Media, a fledgling youth-targeted television and Internet venture he co-founded, which announced plans on Monday to raise up to $100 million in an initial public offering.

Current Media needs to raise roughly $40 million by May 4 to pay a four-year old debt related to an acquisition from France's Vivendi (VIV.PA: Quote, Profile, Research). It plans to use additional proceeds for corporate purposes and possible acquisitions, according to a statement filed with the Securities and Exchange Commission.

But the U.S. IPO climate has recently cooled as investors eye a possible recession.

Only four companies pulled off public offerings in January, while four times as many postponed or withdrew deals worth an estimated $4 billion, according to data tracker Dealogic.

IPO markets have not seen this kind of chill since March 2001 when 33 deals were shelved.

"I don't think they could pull this off without Gore," said Francis Gaskins, president of research firm IPOdesktop.com. "They would have to spend a lot of money to create a brand otherwise.

Current Media saw revenue grow by 68 percent to $63.8 million in 2007, but it had a net loss of $9.9 million compared with a $7.6 million loss in 2006.

The losses put it at odds with the deals that succeeded in launching IPOs in recent weeks. All were in the black.

"There is huge uncertainty over its profitability," said Jay Ritter, professor of finance at the University of Florida. "But their revenue did grow rapidly from 2006 to 2007, and their business is not just an idea" like some of the failed dot.com businesses of the late 1990s.

Current Media counts on advertisers for about 16 percent of revenue. The rest comes from fees paid by cable, satellite and telecommunications operators that carry its channel.

It carries content produced in-house, from other providers including Reuters (RTR.L: Quote, Profile, Research), and about one-third of air time is devoted to 2-10 minute segments submitted by viewers.

It launched to 19 million U.S. households in 2005, and has now grown to 51 million households in the United States, Britain, Ireland and has plans to launch in Italy.

It says its Emmy-award winning programming is "democratizing media", and that it integrates TV with the Web through its site Current.com, launched last October, with the latter not yet being a revenue-generator.

"This is a limited-growth vehicle with capital constraints that will make it difficult to expand," said Hal Vogel, head of Vogel Capital Management and author of "Entertainment Industry Economics."

"It may appeal to those that are in sync with his (Gore's) political views, but if you are looking for the best returns I don't see it here," Vogel added

Chris Marangi, associate portfolio manager with Rye, New York-based Gabelli & Co, said it faces stiff competition.

"It is on the bleeding edge of the convergence between TV and Internet," said Marangi, "but they are small and lots of larger companies are going to be fierce competitors."

San Francisco-based Current Media did not detail Gore's equity stake after its Class A stock offering. Gore and Chief Executive Joel Hyatt, who co-founded the company, will control all shares of Class B stock, which have ten times the voting power of the stock being issued to new investors.

Other investors in the company include Yucaipa Corporate Initiatives Fund, which has ties to former President Bill Clinton, for whom Gore was vice-president.

Perhaps the biggest risk for potential investors is disclosed in the 20-pages of risk factors listed in the offering prospectus.

"If Mr. Gore were no longer actively involved in our business or no longer to hold a substantial ownership stake in us, our relationships with key distributors and our business could be materially and adversely affected," Current Media said.

Gore has no binding contract to stay but might miss the paycheck if he left, said IPOdesktop's Gaskins. The company paid Gore about $1.05 million in 2007 in salary and bonuses. Hyatt was paid about $1.04 million.

"They are paying themselves a million (dollars) a year, that is a lot of money to take out of the company," he said.

J.P. Morgan Securities Inc (JPM.N: Quote, Profile, Research), Lehman Brothers Inc (LEH.N: Quote, Profile, Research) and Pacific Crest Securities Inc are underwriters of the IPO. (Editing by Tim Dobbyn)