Nexsan: Next to go out

Contact: Brenon Daly

Nearly two years after it first filed its IPO paperwork, storage vendor Nexsan appears set to hit the Nasdaq later this week. The company is planning to sell 4.8 million shares at $10-12 each. At the high end of the range, the offering would raise some $59m for Nexsan, which would start life as a public company with an initial valuation of about $200m. Thomas Weisel Partners is running the books for Nexsan, which will trade under the ticker NXSN.

The offering continues the trend of smaller IPOs and lower initial valuations that we recently noted. Back in April 2008, Nexsan planned to raise $81m in its offering. However, the actual proceeds will come in about one-quarter below its original expectation. Similarly, the valuation that we penciled out for Nexsan two years ago has proved a bit too rich.

Back in our initial report on the company, we figured that Nexsan would hit the market at a valuation of around $300m. Built into that projection, however, was the assumption that the storage vendor would be able to increase revenue at about a 20% clip. (That didn’t seem unreasonable back in 2008, considering Compellent Technologies – a similar storage startup that had recently gone public – increased revenue 78% that year.)

Instead, Nexsan actually shrank. In its fiscal year that ended June 30, 2009 – a period that basically covers the recent ‘Great Recession’ – overall sales slipped to $61m from $63m in the previous fiscal year. In the two quarters since then, Nexsan has started to grow again, although at a rather muted 6% pace. On the other hand, Nexsan did manage to move into profitability during the worst economic conditions that most US businesses have seen.