A few weeks after filing to go public, Elastic, a search-focused startup from Mountain View, set a price range for its IPO. Born in 2012, the company that helps corporations better search their own data will aim for an IPO price between $26 and $29 per share.
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Elastic will sell 7 million shares in its debut, implying a raise between $182 million and $203 million, inclusive of fees and other costs. The firm’s underwriters may purchase another 1.05 million shares at the IPO price if they wish.
Not inclusive of the potential, extra shares, Elastic will have over 69 million shares outstanding after its IPO. That values the firm between $1.81 billion and $2.02 billion. Those figures rise by around $26 and $29 million if the underwriter option is exercised.
So how do those valuations feel set against the firm’s financial performance? Let’s recall some of our prior notes:
- Most revenue is subscription-based ($149.4 million out of $159.9 million, year ending April 30, 2018).
- Rising net losses ($18.6 million in its most recent quarter, $10 million in the year-ago period).
- Growing free cash flow across the same two quarters.
That mix is healthy for recent IPOs. Firms today can go public simply on growth, which Elastic has (+81.3 percent, comparing its last two fiscal years). Throw in free cash flow positivity, and you’re set.
On the other hand, Elastic is asking for a 8x to 8.9x revenue multiple (most recent quarter aggregate revenue times four), which is historically steep. It’s not nuts by today’s standard (Zendesk’s public trailing revenue multiple is 14.31), but it’s still high.
More when it prices.
Top Image Credit: Li-Anne Dias