Ten months after filing its paperwork to go public, Nutanix finally had its initial public offering on Friday, and the entire tech industry is relieved.
Its IPO popped big, ending the day up over 130%, with shares trading at around $37 compared with its $16 initial price.
That values the company at well over $5 billion.
The tech industry was watching closely. Nutanix is one of the so-called unicorn companies. It was valued at $2 billion 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 highly valued 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 venture capitalists offered. And VCs didn’t want to keep pouring more money into them either.
Nutanix postponed its IPO for months, then took out a $75 million loan from its IPO underwriter, Goldman Sachs, making the tech industry wonder if the company’s IPO would be shelved permanently or if it would try to sell itself. That would have been a bad omen for other unicorn startups.
To keep employees from jumping ship, Nutanix cofounder CEO and largest shareholder, Dheeraj Pandey, even gave up about $14 million of his 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 as though 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 Friday’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 centers that combine computers with storage and a type of software called “virtualization” 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, and 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 51% growth in 2015)
• 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)