Liquidity Public Startups Venture

No One Knows What Anything Is Worth

CrowdStrike, a cybersecurity company, priced its shares last night above its raised range. By choosing a $34 per-share IPO price, CrowdStrike, which raised nearly a half-billion dollars, got itself a greater than $6.6 billion valuation.

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And then it began trading today and instantly added billions to that figure, reaching the $12 billion mark according to CNBC. At current tally, the firm is worth around $57.31 per share, or $11.3 billion, on a non-diluted basis.

That’s a lot of money! A huge, epic, staggering mound of value. What, you might ask, is worth such a wall of cash? Well, look at this chart, drawn from page 10 of its S-1/A:

There are some good things in that, like greater-than-100-percent revenue growth. And there are some bad things, like continued operating losses, and gross margins in the low-seventies.

But what is fascinating is that CrowdStrike, which lost a little under $400 million in its three most recent fiscal years, is worth $11 or $12 billion. Plus, it looks on track to lose another $100 million this year unless profitability quickly improves.

At its Q1 high estimate, CrowdStrike is on an annual run rate of $383.8 million. That gives it a current run-rate multiple of 29 and change. Let’s presume it can keep growing, and add wrap the year with $600 million in revenue. That still works out to a current revenue multiple of around 19.

That’s super, duper, crazy high. SaaS companies are dancing around 10 times revenues, a historically high number. What’s up with 19x or 29x? It seems that public-market investors are still chasing growth with every bit of gusto as private-market investors. In 2019, an expected fourth-consecutive nine-figure loss is zero worries for investors happy to pour money into a company in a hot space with quick growth.

Which might be the right answer! But private investors valued CrowdStrike one way, and then bankers got a second guess in, and everyone was wrong, it seems. Even funnier, I expect that CrowdStrike is now a bit over its boots, value-wise (a bold prediction, I know), so while Wall Street looks silly today, that could all change after a single earnings report.

After all, growth-companies are learning that if that’s their bag, they can’t ever miss a quarter. No one knows what anything is worth!

Illustration: Li-Anne Dias