Unpacking DocuSign’s IPO Price Range

Morning Report: DocuSign wants $24 to $26 per share. Here’s how that shakes out.

DocuSign’s IPO walk continues this week with the business-focused esignature company setting an IPO price range of $24 to $26 per share.

That per-share price means the company will raise a tidy sum if all goes to plan. DocuSign is selling just over 16 million shares in its IPO alongside 5.6 million shares from extant shareholders. At the high-end of its range, the company could raise $564.2 million. And, if you add in the shares that underwriters may purchase at the IPO price, the full haul could reach $648.8 million.

Big numbers, to be sure, but not the number that everyone wants. At $26 per share, what is DocuSign worth? Using the firm’s count of its common stock that will “be outstanding after [its] offering,” 152.1 million shares, DocuSign will be worth $3.95 billion. ($3.8 billion at a mid-point price of $25, as SeekingAlpha points out.)

That’s many billions.

Returning to our prior work on DocuSign’s updated financials, we noted that the firm’s revenue had grown healthily from $381.5 million to $518.5 million in its last fiscal year, while its losses fell from $115.4 million to $52.3 million over the same period. That worked out to 36 percent revenue growth at around the half billion mark, coupled to falling losses along with newly-positive operating and free cash flow.

Will investors pay 7.6 times trailing revenue for it (that revenue multiple uses $26 per share for DocuSign’s IPO share price)? I think that Zuora’s recent IPO appears to indicate that the answer is yes. After all, Zuora had what we could call lesser financials, and it managed to raise its IPO range followed by a cracking first day of trading. That means that current market sentiment could bode well for DocuSign’s hoped-for pricing.

DocuSign is currently pipped to go public next Friday. More when it prices or its range rises.

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