Robotic process automation unicorn UiPath is set to go public this week, concentrating our focus on its value.
The well-known company was last valued on the private markets at $35 billion in February when it closed a $750 million round. Living up to that price as a public company, however, at least when it comes to its formal IPO price, is proving to be challenging.
In a sense, that’s not too surprising given that the red-hot IPO market cooled as Q1 2021 came to a close. UiPath raised its last private round when the markets were most interested in public offerings and is now going public in a slightly altered climate.
In numerical terms, UiPath raised its IPO range from $43 to $50 per share, to $52 to $54 per share. That’s a 21% jump in the value of the lower end of its range, and an 8% gain to the value of the upper end of its per-share IPO price interval.
UiPath is also selling more shares than before, which should make its total valuation slightly larger at the top end than a mere 8% gain. So let’s go through the math one more time. Afterward, we’ll stack its new simple, fully diluted IPO valuations against its final private price, ask ourselves if our musings on the company’s recent profitability bore out, and close by asking where the company might finally price, and if we expect it to do so above its new price range.
UiPath at $54
UiPath intends to sell 9,416,384 shares in its IPO, up from 6,807,688 shares, per its preceding S-1/A filing. The company also expects current shareholders to sell 14,474,393 shares as before. Its greenshoe offering for its underwriting banks expanded slightly to 3,583,616 shares over the same time frame.
All told, some 27,474,393 shares of UiPath Class A stock will be sold through its IPO, provided that its underwriters’ exercise their option. That works out to a maximum gross sale of $1.48 billion in its debut. This is a huge IPO. After the offering, some 519,153,731 Class A and Class B shares of UiPath will exist. That gives the former startup a simple valuation between $26.99 billion and $28.03 billion.
But what about UiPath’s fully diluted IPO valuation at $54 per share? Once we added to its share count all the equity that is “issuable on the exercise of stock options outstanding as of January 31, 2021” and “issuable on the vesting and settlement of RSUs outstanding as of January 31, 2021,” UiPath’s share count rises to 558,812,722. At that figure, and the upper end of the new IPO price range, the company could be worth as much as $30.17 billion.
So, even at the extreme upper end of how we can calculate UiPath’s worth, it is still set to take a price cut as part of its IPO.
Certainly, the raised range and expanded share sale will provide the unicorn with a stronger IPO valuation and more capital on its balance sheet, but there’s still a notable difference between UiPath’s final private price and where it expects to price its public debut. TechCrunch noted last week that the price gap could serve as a warning to late-stage investors bidding up the value of a near-IPO unicorn in hopes of a quick flip.
That warning appears to be holding up for the time being.
At the same time, the possible impact of UiPath’s rising unadjusted (GAAP) profitability and growth in the final quarter of 2020 appear to have lifted its value; the company included quarterly data in its IPO filing for the first time in its recent S-1/A filing.
Things could still change. If UiPath prices above its range, it will further close the gap between its IPO and final private prices. But the chance that it can price so aggressively that closing the gap happens feels somewhat remote at this juncture.
The new question is whether this — at least compared to what happened with Roblox and its own mega-round pre-public flotation — is tied to UiPath itself or is more a larger trend in IPO prices that the company is being swept up in. On one hand, you could be skeptical about the future of RPA. That’s a perfectly defensible position, though I suspect that UiPath’s backers would love to argue with you about it.
On the other, in the wake of Compass’ somewhat slack debut and the AppLovin IPO miss, it isn’t hard to see why there could simply be caution bubbling in IPO markets.
Finally, I might normally be somewhat rude to UiPath about having what is technically a down IPO on the horizon. But as the company was worth just $10.2 billion last July, it has nearly tripled in value since then. That makes general jocularity and scorn harder to scrape together in its case.
More when it prices.