Public Startups Venture

WeWork Won’t Be The First Company This Cycle To Go Public At A Discount

News broke today that The We Company, better known as WeWork, may go public at a sharp discount to its last private valuation. As Crunchbase News wrote here, the firm could target a price as low as $20 billion. That would represent a nearly 57.5 percent discount to its last private valuation.

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If WeWork does debut for a price lower than its final, privately-sourced valuation, it will not be the first company to do so. Indeed, it won’t even be the first company to pull off the feat recently. Several other companies in the current technology cycle have managed a similar result.

Let’s remind ourselves who did.

Cloudera: 2017

The seeds of Hadoop-focused Cloudera’s down IPO were planted in its enormous $740 million Series F that took place in early 2014. Worth just $765 million (post-money) after its 2012 Series E that brought the firm $65 million in new capital, Cloudera later raised a two-part Series F.

The first traunch, a $160 million investment at a $1.96 billion post-money valuation, represented quick value growth in the two years since Cloudera’s Series E. The second part of the Series F, the $740 million check, mentioned previously, pushed the firm’s valuation to over $4.1 billion. (T. Rowe Price led the first, Intel Capital took on the second.)

The firm’s real worth never caught up. After its March, 2014 Series F rounds, the company grew but not enough by the time it went public. Here are our notes from its IPO pricing cycle:

In its most recent fiscal year, which wrapped January 31st, 2017, Cloudera reported aggregate revenue of $261.0 million, up 57.2 percent from its preceding fiscal year. In that year, Cloudera’s revenues were a more modest $166.0 million. Cloudera also lost $187.3 million—down 7.8 percent from its gut-busting prior-year loss of $203.1 million. Those are GAAP results, mind, not adjusted figures.

It wasn’t enough. The company priced at $15 per share, valuing Cloudera at around $2 billion, a massive discount to its final private price. The company is worth just $2.3 billion today, years and a merger later.

Domo: 2018

Ah, the Domo IPO. Amidst a successful and increasingly interesting Utah startup scene, Domo’s IPO was a rare misstep. The firm’s debut came after posting an impressive fundraising history. However, that fundraising wound up being more indicative of the company’s ability to raise, instead of its ability to grow.

Domo is worth $681.6 million today, according to Google Finance. According to Crunchbase the company raised $689.7 million while private. You generally want to see a multiple of the latter when you calculate the former. Domo is still underwater, quarters after its public offering.

And its sub-unicorn valuation is a fraction of the $2.3 billion it was once worth. The firm’s last private round, a $100 million Series D from mid-2017, did not provide enough space for the business intelligence company to grow into its valuation. Our review of its S-1 filing and constituent financial performance was largely incredulous. Others agreed.

The market wound up pricing the high-burn, low-growth company at around $510 million. In terms of percent declines from private valuation to IPO worth, this may be a record.

Uber: 2019

Uber’s IPO, did you hear about it? If you’ve ever read Crunchbase News, you have. But just in case, a reminder.

In terms of a startup’s rise, Uber’s growth from startup to behemoth is now legend. From breaking rules around the globe, to raising billions and billions of dollars, to VC-CEO intrigue, Uber’s story is a distillation of the Unicorn Era.

Its IPO, however, was more comedown than comeback. The company, once expected to be worth over $100 billion when public, wound up pricing at $45 per share, valuing it at around $75 billion (higher on a fully-diluted basis). That figure was towards the low-end of its IPO range, making it a disappointment for the company.

Notably, an August 2018 deal with Toyota that brought Uber $500 million valued it at $76 billion. So, Uber’s IPO valuation was a hair under the company’s final private valuation (Crunchbase has a lower value listed for the company after the transition, but hang tight.) Regardless of how we value the firm (diluted, not diluted), or which final private valuation we peg to the firm, Uber’s shares opened lower than its $45 price and closed down on their first day.

The company’s quick share price declines wound up continuing. Today Uber is worth about $55.5 billion, and we’re including it in this list as it managed to barely meet its final private valuation while pricing its IPO but opened $3 per share lower. That’s down.

And given that Uber is now worth a fraction of that fabled, and now ridiculous-sounding $120 billion IPO guesstimate (bankers!), it’s a down IPO in spirit if not also in name.

Short List

It’s not a very long list of companies we can recall caring about and going public at a down valuation. If WeWork prices where it now seems likely, the company will have a lot to prove ahead of it. That said, Uber and Cloudera are still worth billions despite IPO troubles. Perhaps WeWork will manage a good debut, and find some positive momentum when public.

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