Box, a cloud storage and file management company, could be moving its IPO forward once again. Box famously filed, and then didn’t hit go on, its offering in the time frame that the market initially expected.
A deterioration in market sentiment and the share price decline of a number of growth technology stocks led to a general slowdown in the IPO pipeline.
We’re still waiting for the company to file an update to its S-1 document, which will include information from its first fiscal quarter of the new year. A Box spokesperson provided TechCrunch with the following statement:
“Our plan continues to be to go public when it makes the most sense for Box and the market. That plan hasn’t changed. We’re focused on the fundamentals of growing our business, building deeper and stronger customer relationships, and continuing to execute against our strategy.”
Why might Box shift back into gear now? I think due to the market generally having more zip to it, and the ensuing success of three recent public offerings, Zendesk, MobileIron and, to a smaller extent, Arista Networks.
Each of the three firms had a strong first day, showing appetite for technology shares. MobileIron and Zendesk are SaaS companies that are investing heavily in growth. This means that they are losing money as they look to grow their GAAP revenue and, yes, their ARR. That makes them similar to Box, a firm that is also looking to quickly expand its recurring revenue and is deploying ample cash to do so.
Put simply, the recent success of Zendesk and MobileIron indicate that the investing public appear willing to accept short- to medium-term GAAP losses on the promise of quickly advancing revenues in the medium term.
MobileIron’s CEO told me in a post-IPO interview that he had found investors to be “discerning.” Separately, the CEO of Zendesk told TechCrunch that he had been “impressed by the quality of the investors that we’ve met on our roadshow,” and that the “public market investment is as sophisticated as the private market investment.”
Starting with MobileIron’s most recent debut, the company was welcomed with a 17 percent pop during its debut. MobileIron priced its offering mid-range.
What’s interesting is that MobileIron’s most recent quarterly revenue growth was modest. As TechCrunch reported on the company’s IPO day:
In its updated S-1 filing, MobileIron detailed its first-quarter 2014 results, in contrast to its first-quarter 2013 results. Revenue grew, modestly, from $25.82 million to $28.21 million, but “Subscription” revenue jumped from $2.73 million to $5.96 million.
Parsing that, I think that investors were content to value the company more on its growing ARR — up more than 100 percent, its S-1 implied — than its short-term, year-over-year revenue growth. MobileIron’s loss widened in the first quarter, from from $3.1 million in the first quarter of 2013 to $13.9 million in the first quarter in 2014.
Zendesk also priced mid-range. It experienced a strong flotation, and is up nearly 100 percent. However, there was some turbulence getting it out the door, I’ve heard. But the stock has performed since it’s been live.
Finally, Arista Networks went public and was well received. It’s a profitable company, making it slightly separate from the other companies mentioned here. I bring it up because it raised $226 million in its flotation, around the $250 million that Box’s S-1 claims it wants to raise.
All told, the market doesn’t appear to be sizzling, but it also doesn’t feel downright cold. Provided that Box has strong first-quarter numbers, its IPO could shake out well. Until we have new numbers, of course, we’re still mired in speculation.