Acquisitions are in the mix today.
Twilio, an API-powered communications company, announced that it will acquire Sendgrid, another digital communications platform, for an all-stock deal valued at $2 billion. Both companies are publicly traded.
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Denver, Colorado-based Sendgrid was founded in 2009 and raised $80.4 million before its public debut in November 2017. The company raised $131 million in its IPO at a $652 million valuation. Its current market cap is about $1.64 billion, inclusive of its share price pop following the announcement of the deal.
Founded in 2008, Twilio raised $261.3 million in its lifetime as a private company. The San Francisco-based company raised $150 million in its 2016 IPO at a valuation of $2 billion. Its valuation has since soared to $7.42 billion.
The deal unites two large players in the digital comms space, albeit with differing focuses. Sendgrid is best-known for its email focus. Twilio, in contrast, came to fame fighting players like Nexmo in its fight to own API-powered telephony capabilities. Think the sorts of texts that you get for two-factor password confirmations or what Uber sends your phone. (Uber has lessened its dependence on Twilio, dinging its stock price for a time.)
As a public company, Twilio has excelled. Its $15 per-share IPO price is dwarfed by its recent range in the 70s. For a company as young as Twilio (in public terms), it’s been a great result. However, Twilio has long been overdependent on a few customers deriving a large portion of its top line. That’s no good for a company that wants to be bulletproof.
The question is whether Twilio is overpaying for Sendgrid. The latter, as we noted above, is still worth sharply less than the $2 billion on offer. And Sendgrid, before the deal was announced, was only up a little over a quarter from its IPO price ($24 to around $31).
While Twilio grew 54 percent in its last quarter, compared to its year-ago quarter, Sendgrid grew a still-respectable 32 percent. In its last earnings report, Sendgrid also raised its forecast.
And that’s what you need to know. What’s almost odd is how this deal feels a bit rare. How often do unicorns swallow each other whole while both are public?
Note: The state of the Uber-Twilio relationship was clarified in-text after publication.
Illustration Credit: Li Anne Dias