Contact: Brenon Daly
As far as Wall Street is concerned, the outlook for the tech IPO market is still cloudy after Cloudera’s offering. Sure, the data analytics platform vendor priced shares higher than its underwriters expected and investors pushed the freshly minted stock about 20% higher in aftermarket trading on Friday. But that solid start isn’t likely to necessarily draw other startups to the public market because Cloudera’s capital structure got so uniquely inflated.
Few startups could even imagine – much less collect – an investment of three-quarters of a billion dollars from a single investor in a single round, as Cloudera did from Intel three years ago. The chipmaker paid up for the privilege, putting a ‘quadra unicorn’ valuation of $4.1bn on Cloudera. Altogether, Cloudera raised more than $1bn from private market investors, making the $225m raised from public market investors seem almost like lunch money.
And then there’s the small matter of valuation. In its debut, Cloudera is only worth about half of what Intel thought it was worth when it made its bet. (As we noted in our full preview of Cloudera’s IPO, Intel’s investment appears even more bubbly when we consider that, at the time, Cloudera was generating less than half the quarterly revenue it currently puts up and its operating loss actually topped its revenue.)
As a longtime corporate investor, Intel can chalk up the overpayment for the stake of Cloudera to ‘strategic’ considerations. (Much like the chipmaker effectively wrote off its massive bet on security, unwinding half of its underperforming acquisition of McAfee at roughly half the valuation it initially paid in the largest infosec transaction in history, according to 451 Research’s M&A KnowledgeBase.) Besides, Intel can afford it: the day that Cloudera priced its IPO – thus confirming Intel’s overpayment – the chipmaker reported that it earned $3bn in the first quarter of this year alone.