Contact: Brenon Daly
It’s not quite the clichéd ‘best of times, worst of times’ in the tech IPO market right now, but there’s a clear split in fortunes for companies coming to market. Whimsical consumer technology firms are back in favor, while the more serious enterprise-focused tech vendors are struggling to find buyers for their equity. That was shown in sharp relief in the divergent receptions of two tech companies – one from each of the broad sectors – that debuted Friday morning.
Representing enterprise tech vendors, we have Five9. On paper, the call-center software provider would appear to have a bullish profile for Wall Street: a pure SaaS delivery model, solid growth (30%+ in 2013) and a big opportunity in front of it (the company sizes its existing market at some $22bn). And how did that go over with investors? Well, Five9 had to take a sharp discount to even get public. It had planned to sell its shares at $9-11, but instead priced at just $7 and closed Friday at $7.52.
While Five9 was discounting its offering, the IPO from its consumer counterpart, GrubHub, was headed very much in the opposite direction. The online takeout ordering service sold more shares than originally planned at a higher price than originally planned. After pricing its offering at an above-range $26 per share, it closed at $34 on the NYSE.
The discrepancy in valuation between the enterprise and consumer companies is even more startling. Wall Street says Five9, which has roughly 48 million (undiluted) shares outstanding, is worth about $360m. That works out to about 4.3x 2013 revenue of $84m. On the other hand, GrubHub is valued at some $2.7bn, or nearly 20x 2013 revenue.
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