Ten months after filing its paperwork to go public, Nutanix finally had its IPO on Friday, and the entire tech industry is relieved.
Its IPO popped big, up well over 90%, with shares trading at around $29 compared to its $16 initial price. That values the company at over $4 billion, and the stock is still rising as we write this.
The entire tech industry was watching. Nutanix is one of the so-called “unicorn” companies. It was previously valued at $2 billion back in 2014, just at the start of the last unicorn phase that saw over 150 startups raise so much money, at such great terms, that they were each valued at $1 billion or more.
At the start of 2016, investor sentiment for such startups cooled, leaving many of these companies sort of stranded. Many were convinced, while the money was flowing, to burn through it and grow as fast as they could. So they didn’t have the kind of balance sheets that would convince public investors to buy them at the same valuation as their VCs offered. And VCs didn’t want to keep pouring more money into them either at such great terms.
Nutanix postponed its IPO for months, and then took out a big, $75 million loan from its IPO underwriter Goldman Sacks, making the tech industry wonder if the company’s IPO would be shelved permanently or it would try to sell itself. That would have been a bad omen for other unicorn startups.
To keep employees from jumping ship, its cofounder CEO and largest shareholder, Dheeraj Pandey, even gave up about $14 million of his own future stock grants to be distributed to employees, to sweeten the available pot for them.
When Nutanix finally decided the atmosphere was right to try its IPO again (thanks to Twilio’s blockbuster summer IPO), at first it looked like Nutanix would simply take it on the chin as a down-round, being worth less than a previous valuation. It initially priced shares at $11 to $13, a range that would have chopped its valuation.
But then it squeaked by. A day before trading, it increased its opening price to $16, which gave it a $2.2 billion valuation and raised about $240 million for the company.
And with today’s boom, Nutanix has launched itself even more successfully than that. This should open the doors for more unicorns to try an IPO as well.
The company helped invent a tech market called “hyperconverged” computing. It makes equipment for data centres that combine computers with storage and the “virtualization” software that makes it all run more efficiently.
The financials it released earlier this month showed that its top-line revenue is still growing 84% year-over-year, its billings more than doubled while losses are slowing — all encouraging things for public investors. On top of that, its core business is generating real cash now. It reported:
– Full year revenue (ended July 2016): $444.9 million, up 84% year-over-year
– Billings: $637 million, up 106% year-over-year
– Operating loss: $165 million, up 40% year-over-year (but slowing from 2015’s 51% growth)
– Net loss: $168.5 million (Nutanix has never been profitable)
– Operating cash flow: $3.6 million (turned operating cash flow positive for the first time this year)