Coupa IPO: Skyrockets Over 90% During First of Day Trading
Coupa Software shares skyrocketed more than 90 percent in its market debt on the Nasdaq Thursday.
Coupa CEO Rob Bernshteyn said the billion dollar cloud-computing company is focused on adding value that drives customers forward.
"We are going after a huge, total addressable market. We are managing our growth very very carefully. For every investment dollar we have burnt, we have created a dollar in recurring revenue - that is how we are looking at this business," said Bernshteyn on CNBC's " Squawk Alley."
Explaining that since profitability never goes out of style, Bernshteyn said "that is what we are going for our customers."
SAN MATEO - Following a recent trend of grand slam tech IPOs, shares of Coupa Software jumped nearly 85 percent in the company's public market debut Thursday.
The San Mateo-based software company's shares were trading at $33 when the market closed Thursday afternoon, giving Coupa a market cap of about $1.6 billion - up from its $1 billion valuation as a private company.
It's the fourth consecutive Silicon Valley tech startup to see a big first-day pop, and it appears that the freeze the valley suffered earlier this year - there were no tech IPOs for the first five months of 2016 - has thawed. Now analysts are turning their attention to the big-name "unicorns" waiting in the wings, such as Snapchat, Dropbox and Spotify.
"I think this just puts another big exclamation point on (the idea that) tech IPOs are rolling again," said Adley Bowden, vice president of market development and analysis for venture capital database PitchBook. "We expect to see more tech companies go public and hopefully see similar results."
So far the Silicon Valley tech IPOs that have done well - Twilio, Talend, Nutanix and now Coupa - are companies with little public name recognition. The indicator that the market has recovered will come when name-brand consumer tech companies start going public, Bowden said. Several such companies have been rumored to be planning IPOs, he said, and seeing the recent string of successful offerings could give them the push they need.
San Francisco-based file-sharing and storage company Dropbox reportedly has met with advisers to discuss a possible 2017 IPO. Venice-based messaging service Snapchat, which recently re-branded as Snap, is working on an offering that could price as early as March, The Wall Street Journal reported Thursday. And music streaming company Spotify also is reportedly shooting for an IPO next year.
"Probably not Uber," Bowden said. "But you've probably got a Spotify ... You've got a Dropbox, maybe even a Snapchat, that are all sort of circling, are close and are likely waiting for these signals in the market to go."
Seeing those name-brand companies go public will inspire broader confidence in the market, said Jeff Thomas, Nasdaq's head of listings for the West Coast.
"Really the question is: who's going to be that first one out?" he said.
Coupa, which sells cloud-based software that helps other companies manage their spending, is less of a household name, largely because it doesn't cater to consumer clients.
The software company raked in $133 million through its IPO Wednesday evening, offering 7.4 million shares at $18 each - and pricing at the high end of the $16-$18 range the company set the day before. Coupa originally planned to price its shares between $14 and $16, but upped that range in a last-minute show of confidence.
Pricing an IPO is a balancing act, analysts say. While Coupa ultimately left money on the table with its $18 price - since investors were willing to pay nearly twice that on the public market Thursday - that conservative price set Coupa up for a significant first-day bump, which in theory gives it momentum that will lead to long-term value.
Coupa CEO and President Rob Bernshteyn said the company is less focused on its one-day ups and downs. Nevertheless, Thursday was a good day.
"There was celebration, no doubt about it," Bernshteyn said in an interview with this newspaper. "We're very happy about being available in the public market."
The timing of Coupa's IPO wasn't dependent on the string of successful tech offerings before it, Bernshteyn said. It was internal factors that pushed Coupa to go public. For instance, the 10-year-old company has proven its worth with big-name clients such as Salesforce, Juniper Networks and VMware, Bernshteyn said, which signaled to executives that Coupa was ready for the public market.
Coupa isn't profitable, and saw a net loss of $24.3 million on revenue of $60.3 million during the first half of 2016.
Coupa is trading on the Nasdaq Global Market under the symbol COUP.
The software company's offering comes at the tail end of a year that Bowman said is on track to be one of the slowest in decades for tech IPOs. But those that have gone public this year have done well. San Jose-based cloud computing company Nutanix wowed the valley last week with a 131 percent pop during its first day trading. Earlier this year, San Francisco-based cloud communications startup Twilio saw a 92 percent pop, and shares of Redwood City-based software company Talend jumped up 42 percent.
was off to the races when it went public on Thursday. The "spend management" software company priced its IPO at $18 and saw its shares almost double during its first day of trading.
With clients like Nike and Toyota, Coupa helps companies keep tabs on everyday expenditures and competes with divisions of Oracle and SAP. Founded a decade ago, they claim they've saved their customers $8 billion to date.
But they're still not profitable. For the six months ending in July, Coupa lost $24.3 million, which compares to a loss of $25.1 million in the same period last year. Yet revenue is growing, up to $53.2 million from $31.6 million in the same time frames.
CEO Rob Bernshteyn tells us they are more focused on their margins than profitability right now. " For every dollar we burned, we created well over a dollar in recurring revenue," he told TechCrunch. He says he's looking to "build this business for the long-term."
Brian O'Malley at Accel Partners, who invested in Coupa while he was at Battery Ventures, talked about how the company became an early leader in its space. "Spend management had been a core part of enterprise software on premise, so it made sense that someone would take it to the cloud."
Coupa's largest shareholders include Battery Ventures and BlueRun Ventures. It listed on the Nasdaq under the ticker "COUP."
Featured Image: Photo by Christopher Galluzzo / Nasdaq
The filing is the latest in what's turning out to be one of the slowest tech IPO market ever. Only 5 tech companies have gone public this year.
Here's a quick rundown of some of the most interesting numbers from Coupa's filing:
- It had $83.6 million in revenue in 2015 (up 66% year-over-year)
- It lost $46 million last year. But its net loss is shrinking, as it lost $24.3 million in the first six months of this year, slightly down from the $25.1 million net loss recorded in the same period of last year.
- It spent 65% of its revenue on sales and marketing. That dropped to 58% in the first six months of this year.
- Holds ~$80 million in cash as of July 2016. Coupa's raised $169 million in total in private funding.
Coupa is best known for its procurement software that helps companies buy suppliers and manage suppliers, though it also offers other financial software.
Coupa last raised $80 million in June 2015, when it was reportedly valued at over $1 billion. That means the company earned the coveted "unicorn" status with less than $100 million in annual revenue.
That makes Coupa's IPO an interesting case to watch as its annual revenue is much smaller than that of some of the other tech companies with similar valuations.
Twilio, for example, had $167 million in revenue in 2015, the same year it first became a startup worth $1 billion. Nutanix, who raised at a $2 billion-plus valuation in August 2014, had $241 million in revenue in 2015 (fiscal ended July 2015). Talend, a French company that went public in July, now has a market cap of ~$750 million, although it had $75 million in revenue last year.
In any case, Coupa's IPO should be a nice pay day for Battery Ventures, who owns over 16% of the company. Its CEO Robert Bernshteyn owns 5.8% share of the company.
Coupa Software's mission hinges on the thesis that companies are willing to spend money to save money. That argument went over well with investors on Thursday during the cloud software company's Nasdaq debut.
The company's shares reached a high of more than $41 during its first day of trading-more than double the $18 initial public offering price it commanded Wednesday evening. Its shares closed at $33.28, earning it a market capitalization of $1.66 billion and assuaging fears that the San Mateo, Calif.-based business would fail to justify the "unicorn" valuation of more than $1 billion it commanded after an $80 million venture round in June 2015.
Coupa specializes in systems that help corporate finance teams evaluate what they pay for everything from landscaping services to components-and identify ways to negotiate better contract terms. According to the official count cited in its September IPO prospectus, the company tracks more than $250 billion in spending for approximately 460 customers-including Procter & Gamble and Airbus.
"Many of them are very familiar with Salesforce, which helps drive new revenue," Coupa CEO Rob Bernshteyn tells Fortune. "We're on the other side of that equation. We're helping them spend more efficiently." Before joining Coupa almost eight years ago, Bernshteyn held positions at SuccessFactors and Siebel Systems.
Jonathan Ebinger, general partner with BlueRun Ventures, which was Coupa's first outside investor, said the software helps organizations identify overspending more quickly than the systems typically used by corporate procurement teams. "The CFO understands that this is not a matter of spend management, but rather a matter of managing one of the biggest line items on the corporate P&L," he said.
Hints that Coupa was ready to take its chance on the public market surfaced over the summer, after the successful debuts of two other business software companies: communications software specialist Twilio (which is trading at four times its $15 IPO price) and big data firm Talend Software (up around 33%). In its prospectus filed in early September, Coupa said it hoped to raise about $75 million. It wound up raising about $133 million on the 7.4 million shares it sold.
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Bernshteyn explains the company's decision to go public was, in part, is largely motivated by its interest in raising visibility for new sorts of financial management software. "We want the market awareness, we want the further legitimacy," he says.
There are some pretty big companies standing in its way-including well-established software giants SAP and Oracle -although Coupa's software was designed to work in collaboration with systems from both companies. Another up-and-coming rival is likely to be Workday , which last week added broader budget planning and expense management features to its cloud financial software offering.
Today marks a significant milestone for our Coupa community of customers, partners and colleagues. Today our company stock-COUP--begins trading publicly on the NASDAQ stock exchange.
On behalf of all my Coupa colleagues, I'd like to thank our customers and partners who have shared this journey with us and contributed to our success. This has undeniably been a collective effort, and this day really belongs to all of us.
Our vision has always been to apply modern, cloud-based information technology solutions towards helping organizations optimize their company spending. Our focus has always been on delivering value as a service. In so doing, we aspired to give professionals in this field a seat at the executive table where strategic business decisions are made.
Our customers bravely brought a willingness to look at the challenges in spend management anew. They brought their insights around how things could be done better, both for their own companies, and for the collective Coupa customer community.
Our partners brought with them a willingness to orient their efforts around measurable customer outcomes.
My Coupa colleagues and I brought passion, and conviction. We knew that we'd have unforeseen challenges. But we were also confident in our ability to persevere in the face of any and all obstacles.
On this journey, we crossed paths with many naysayers. Together we proved them wrong. We built the technology, our partners helped us implement it, but it is only through the courageous efforts of our customers who were willing to put their careers on the line and challenge the status quo that this vision has come to fruition.
So, today we say thank you. We hope that you share our pride at this very moment.
Obviously, there will be questions about the implications of reaching this milestone. Will our priorities shift?
The answer is quite simply, no.
If anything, this event gives us more energy and resources to double down on what got us here in the first place, and that is, our commitment to customer success, focusing on results and always striving for excellence. These core values are our foundation.
Today's event does not change who we are as a company. What changes is that today our collective vision is rightfully legitimized.
Coupa is a public company now. Everyone can share, and own shares in our vision.
We are only at the beginning of what's possible in this field. We feel more responsible than ever to support the men and women who are leading the charge in making this function strategic by helping their companies realize significant measurable value.
This is what continues to inspire us as we look to the future. Today, we pause to celebrate, and tomorrow we get right back to work.