A few months back, robotic process automation (RPA) unicorn UiPath raised a huge $750 million round at a valuation of around $35 billion. The capital came ahead of the company’s expected IPO, so its then-new valuation helped provide a measuring stick for where its eventual flotation could price.
UiPath then filed to go public. But today the company’s first IPO price range was released, failing to value the company where its final private backers expected it to.
In an S-1/A filing, UiPath disclosed that it expects its IPO to price between $43 and $50 per share. Using a simple share count of 516,545,035, the company would be worth $22.2 billion to $25.8 billion at the lower and upper extremes of its expected price interval. Neither of those numbers is close to what it was worth, in theory, just a few months ago.
According to IPO watching group Renaissance Capital, UiPath is worth up to $26 billion on a fully diluted basis. That’s not much more than its simple valuation.
For UiPath, its initial IPO price interval is a disappointment, though the company could see an upward revision in its valuation before it does sell shares and begin to trade. But more to the point, the company’s private-market valuation bump followed by a quick public-market correction stands out as a counter-example to something that we’ve seen so frequently in recent months.
Is UiPath’s first IPO price interval another indicator that the IPO market is cooling?
Remember Roblox?
If you think back to the end of 2020, Roblox decided to cancel its IPO and pursue a direct listing instead. Why? Because a few companies like Airbnb had gone public at what appeared to be strong valuation marks only to see their values rocket once they began to trade. So, Roblox decided to raise a huge amount of private capital, and then direct list.
That the effort failed and Roblox still saw its valuation rise far above the price at which it sold stock pre-debut is immaterial. What matters is how strongly the company felt about the possibility of an overheated IPO market fucking up its money.
The UiPath round from this February fits into that recent era; raising $750 million pre-IPO might have felt somewhat strange at the time, but there was some sense to the transaction, namely that UiPath isn’t selling that much stock in its actual public debut. Instead, UiPath’s IPO stock sale is more secondary than primary and could generate a gross haul of less than $300 million if its underwriters don’t purchase more of its stock.
So a bit like Roblox, UiPath repriced pre-debut. But unlike Roblox, UiPath is being told that its final private price, far from being too low, was actually too high! And not by a little bit! By a firm percentage! The gap down from $35 billion to $26 billion is just about 25%. That’s very material.
And it is a surprise, frankly. The company’s rapid growth and improving profitability would have been a winsome cocktail in Q4 2020, or even most of Q1 2021. But with the winds shifting on the public-market front, it could be that UiPath is just a few weeks too late to surf the wave that so many unicorns managed to catch this year.
Not that UiPath is going to go public at a pauper’s price. Indeed, at a valuation of $26 billion, UiPath is valued at nearly 43x its 2020 revenues. Or 31x its Q4 2020 run rate. There’s nothing bad about those numbers. But something led Coatue and Alkeon Capital to value to the company at $35 billion just a few months ago, and that something is gone.
This makes UiPath something of a warning to Tiger and other groups writing myriad, rapid-fire, late-stage checks at higher and higher prices. There is an upper limit, it turns out, to what the public markets will pay for high-growth software incomes after all. And it’s lower than lots of smart money recently expected the threshold to be.
Now watch UiPath set a new, higher IPO price range and turn everything we just said into utter bullshit.