The 2021 IPO cycle is winding down this week as HashiCorp and Nubank priced their public debuts and listed. Happily for startup fans and the venture classes, both IPOs went well. Samsara’s IPO will come next week if current calendars hold up, but that’s pretty much it for the year.
We made it to the end! But that doesn’t mean that we don’t have work to do. We do.
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This morning, we’re parsing the final IPO prices of both HashiCorp and Nubank, tabulating their final pre-debut valuations and revenue multiples, and teasing out what we can learn from their early trading. The goal is to get a good handle on how strong the U.S. technology IPO market looks as 2021 ends.
There should be, provided no major shocks, an active 2022 IPO cycle. Our basis for that perspective is that technology valuations for public companies remain far above historical norms and the backlog of yet-private unicorns is at an all-time high. The combination reads like a recipe for a lot of flotations next year.
But we need to grok how 2021 ended to understand where 2022 begins.
HashiCorp’s IPO
HashiCorp anticipated that it would price its IPO between $68 and $72 per share. It wound up selling equity in its public debut at $80 per share, a massive win for the open source-focused software company.
Renaissance Capital noted that at $70 per share, HashiCorp was worth $14.2 billion. Simple math pegs the company’s fully diluted valuation with an $80 per-share price at $16.2 billion. Given that the company was last valued at around the $5 billion mark by private-market investors in early 2020, its IPO price was nothing short of revolutionary, though we might argue that it was simply underpriced in 2020, undercutting how staggering its IPO price really was.
Regardless, the company’s stock rose after its debut, closing yesterday at $85.19 per share. Yahoo Finance lists what we presume is a non-diluted valuation for the company of $15.24 billion as of the close of trading Thursday.
Given that HashiCorp had revenues of just $82.2 million in its October 31, 2021, quarter, the company’s IPO valuation run-rate multiple works out to just over 49x. If we use the smaller Yahoo Finance number, the company’s run-rate multiple today rests at just over 46x. Those are rich numbers, frankly, and show that unprofitable, growth-oriented companies can still manage top-tier valuations on debut — no need to earn it post-debut.
HashiCorp posted year-on-year revenue growth of just 49% in its last quarter. That’s good but not great for a company of its scale. And its price.
Our read: HashiCorp’s IPO was bullish as hell for 2022 unicorn debuts.
Nubank’s IPO
And then there’s Nubank. After the Brazilian neobanking giant cut its IPO price expectations, you would have been forgiven for thinking its impending IPO would be a letdown for the fintech sector. Maybe a little at most.
After lowering its anticipated IPO price range to just $8 to $9 per share from $10 to $11, the star signs looked poor. But Nubank managed to price at the top end of its lowered range, at $9 per share, which was a recovery of sorts. Since then, the company has done well, trading up to $10.33 yesterday and $11.74 in pre-market trading this morning. That’s a solid post-IPO run, but not a big enough set of gains to drag the Anti-Fun Police to the scene, shouting, “But was this IPO underpriced?!”
Per MarketWatch, the company’s IPO valuation was around $41.5 billion. With $480.9 million in revenues for the September 30, 2021, quarter, Nu Holdings — the parent company of Nubank — had a revenue multiple of 21.6x. That figure has stretched as the value of the company expanded after it started trading.
Looking back through the Nubank IPO filing, it’s clear that the company’s model is working. It grew from $156.1 million in revenue for the September 30, 2020, quarter to $480.9 million this year for the same period. And it held losses roughly flat over the same time frame. Not bad!
My general view is that revenue multiples for neobanks north of 20x while they lack SaaS-level gross margins are bullish. For example, in its most recent quarter, Nubank had gross margins of 46.6%, a full 300 bips under a strong SaaS number. That’s a dramatic difference, and one that you might expect to have an even greater impact on the valuation of Nubank. And yet, not really?
Nu Holding’s IPO is another strong data point for unicorn liquidity as 2021 comes to a close.
So 2022 will be chock-full of IPOs, yeah? Right? Right?