Contact: Brenon Daly
To understand the relative health of consumer and enterprise IPOs in the aftermath of the Facebook offering, consider the rather stark contrast between KAYAK.com and Palo Alto Networks. Both technology vendors set terms for next week’s debuts on Monday, but only enterprise-focused Palo Alto can expect to run with the bulls.
For starters, take a look at the gestation period for each of the offerings. Palo Alto set its range in only its third amendment to its S-1, which it filed just three months ago. (For the record, Palo Alto plans to sell 6.2 million shares at $34-37 each). In contrast, KAYAK’s paperwork has a lot of dust on it. The online travel site originally filed in November 2010 and set its range in its 12th update to its S-1. (For its part, KAYAK intends to sell 3.5 million shares at $22-25 each.)
But the contrast will come out even more sharply in terms of valuation. Although the companies are roughly the same size (Palo Alto did $220m in trailing 12-month (TTM) revenue, compared with $245m in TTM revenue for KAYAK), Palo Alto is more than doubling sales each quarter while KAYAK is posting growth in the mid-30% range.
Wall Street always awards fast-growing companies a premium, but the gap between these two offerings is substantial. Assuming both Palo Alto and KAYAK come to market at the high end of their expected price ranges, the security vendor will begin life with a market cap of about $2.5bn while the online travel site will start life as a public company at a valuation of roughly $1bn. That means Palo Alto will be valued at more than 11 times TTM sales, while KAYAK will garner just 4x TTM sales.
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