PagerDuty calls on an exuberant IPO market

by Scott Denne

Following a nearly six-month lull, the market for enterprise IPOs has picked up where it left off – handing out gushing valuations to high-growth SaaS companies. PagerDuty became the newest beneficiary, pricing above its range and moving well beyond that as the stock began trading. The multiple commanded by the IT operations software vendor sets the stage for another notable year for enterprise IPOs.

In its public debut today, PagerDuty’s share price jumped to $38, about 60% from where it priced its offering ($24). That surge leaves the company with a $2.8bn market cap, valuing it at 23.5x trailing revenue. It also gives PagerDuty a more favorable multiple than many of its peers. For example, the debutant trades within a turn of Elastic, a 2017 vintage IPO that’s double the size of PagerDuty – it posted $241m trailing revenue to PagerDuty’s $118m – and growing at a faster pace (70% vs. 50% year over year last quarter).

PagerDuty isn’t the only enterprise company feeling Wall Street’s good graces. Video-conferencing provider Zoom set a price range earlier this week implying a valuation of $7.7bn (about 28x revenue) on its forthcoming IPO. And infosec vendor Tufin saw a 30% bump in its debut today (we’ll cover that company in this space tomorrow). There’s little doubt that after a dip in equity prices last year Wall Street has, once again, become a welcoming place for enterprise startups – several of last year’s other IPOs trade at multiples in the 20x neighborhood.

The S&P 500 has risen 15% since the start of the year and the latest consumer confidence survey from 451 Research’s VoCUL shows faith in the US stock market coming back to the same levels as last autumn. Should new offerings continue to garner healthy valuations, this year’s IPO pipeline could fill up to compete with last year’s record of 15 enterprise technology debuts, despite the first quarter passing without one.

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Posted in IPO