Cornerstone: the newest — and priciest — HCM vendor

Contact: Brenon Daly

So much for the ‘debut discount.’ Cornerstone OnDemand hit the market Thursday at an eye-popping valuation, going against the recent trend toward conservative pricing for new issues. The human capital management (HCM) vendor priced its shares at $13 each, above the indicated range of $9-11 each. (Goldman Sachs & Co and Barclays Capital are leading the IPO.) By early afternoon Thursday, the stock was changing hands at about $19.

The offering gives Cornerstone one of the richest valuations of any recent IPO. At $19 per share, the company’s market cap is roughly $900m. That’s 15 times trailing bookings (not sales) and likely in the neighborhood of 9x projected bookings. (Our math: Cornerstone reported 2010 bookings of $61m, up 74% from the previous year. Assuming that the growth rate comes down a smidge to 60-65% for 2011, that would put Cornerstone’s full-year bookings at $100m, give or take.)

Cornerstone’s valuation vastly outstrips what the market says rival Taleo is worth, and even puts it ahead of SuccessFactors, which had been the HCM industry’s ‘favorite child.’ (That’s been the view on Wall Street, anyway.) SuccessFactors, which went public in late 2007, currently garners a $2.7bn market cap, roughly 10.5x trailing bookings and about 8x projected 2011 bookings. We should note that both SuccessFactors and Taleo are about four times the size of their newest rival on the public market. But for now, both of them are looking up at Cornerstone.