The success of the LendingClub, Hortonworks and New Relic IPOs this week may have created a moment in the market that Box, a company that has long wanted to go public itself, could use to get its long-delayed flotation done at last.
I’m totally kidding about the “could” bit there, of course. This is precisely what Box has been waiting for since it first filed in March.
The key IPO, as TechCrunch has reported several times in the lead up to its execution, was Hortonworks’. Hortonworks, it appears, is being valued on the strength of its revenue growth, and not on any chance of its delivering near-term profits to its shareholders.
In the first nine months of this year, Hortonworks managed to lose more than $86 million, on revenue of under $34 million. Its shares are more than 45 percent above its offering price, which it had raised prior to launching this morning. In short, investors let the company charge more out the gate, and then gave its shares wings. That for a company with a GAAP operating margin of something like -260 percent is impressive.
Box, by comparison, appears to be in fit shape. For a more detailed take, head here, but Box has seen quick year-over-year revenue growth, and an only small increase in its net loss, comparing the first nine months of 2014 with the year-ago period. In its most recent fiscal quarter, Box showed revenue growth, and falling losses, again compared to the equivalent year-ago period.
The company still generates very expensive revenue, but at least its lines are pointing in the proper directions.
It’s worth keeping in mind that Box really isn’t going public to raise cash for its short-term operational expenses. The company has more than four to five quarters of cash at current tip and could likely raise more or tap the debt market. And Box does have a line of credit in place, for example. The Box IPO will just be a liquidity event.
Hortonworks has done us a favor in terms of being able to predict that, yes, Box’s financials are good enough to pull off an IPO. But it also helps to set a potential pricing pattern. Hortonworks originally priced quite conservatively, and then raised its target range before enjoying a strong first-day performance. For what it’s worth, New Relic also priced small and boosted its share price ahead of its IPO.
It would therefore — and this is merely speculation on my part — not surprise me to see Box do something similar. It could even price its range at an implied down valuation. However, that number, if it sticks, could be annoying to some its shareholders who may desire quicker reduction to their exposure to Box.
I’ll just say it: I don’t know who these people are who are willing to pay so much for a company that increased its loss in raw dollar terms faster than its revenue this year. But here we are and 2014 is weird and this is Silicon Valley so as they say, fuck gravity.
Box declined to comment on the potential timing of its IPO.