Contact: Brenon Daly
In an unexpectedly strong debut, ChannelAdvisor created nearly $400m in market value in its IPO earlier this week. The 12-year-old company, which trades on the NYSE under the ticker ECOM, priced at the high end of its range and then shot up some 30% in its first session.
At the risk of bearishly mauling this bullish debut, ChannelAdvisor appears richly priced. With some 20.5 million (undiluted) shares outstanding, investors are saying the e-commerce channel advisory vendor is worth about $380m. That’s a steep valuation for a relatively small company (2012 revenue of just $54m) that’s only growing in the low-20% range and still has a negative ‘adjusted’ EBITDA figure, not to mention a net loss.
The roughly 7x valuation that ChannelAdvisor got in its IPO also looks pricey when compared with the value that a smaller rival got in its exit earlier this year. Back in February, channel intelligence sold to Google for $125m, which we understand worked out to about 4.5x trailing sales. Channel intelligence was roughly the same vintage as ChannelAdvisor, but only about half the size of the now-public company.
Still, it’s unusual for an IPO to trade at such a sharp premium to an M&A valuation, which should, theoretically, be higher because it reflects the full life value of a company. The gulf could indicate that either Google got a steal in its deal or that Wall Street may be paying too much for ChannelAdvisor.
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