Database software company MongoDB injected another dose of optimism into the resurgent US tech IPO market, surging 33.6% on debut on Thursday after drawing overwhelming demand for its US$192m IPO.
Venture-backed MongoDB sold 8m shares or 16% of outstanding at US$24.00 each, above the US$20-$22 range. That range was increased earlier in the week from US$18-$20 at launch.
Morgan Stanley, Goldman Sachs, Barclays and Allen & Co led the offering, the latest in a steady drumbeat of tech debuts in recent weeks that have delivered handily for new investors.
The deal was many times oversubscribed, prompting underwriters to warn accounts ahead of pricing to expect small allocations.
Debuting on Nasdaq on Thursday, MongoDB opened at US$33.00 and traded as high as US$34.00 before closing at US$32.07.
“It was an excellent outcome all around,” one banker close to the deal said. “There’s a lot of froth in the IPO market between Qudian (which debuted the prior session) and MongoDB but investors are making plenty of day-one returns. You don’t want to be the deal that breaks the momentum.”
MongoDB (the name is based on the word “humongous”) was sized up against the throng of software-as-a-service companies that have gone public this year but the closest comp was Cloudera, which went public in a US$225m IPO at US$15.00 a share in April and priced a US$221m first-time follow-on in late September at US$16.45 a share.
That earlier offering may have helped to familiarise investors with the open-source database software sector, considered one of the largest markets within enterprise software.
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MongoDB ticked a lot of boxes for SaaS investors, including 50%-plus top-line growth, a fast-growing base of 4,300 customers, an attractive recurring subscription-based revenue model, 70% gross margins and a retention rate of 120% - “land and expand, and expand”, as management noted in the online roadshow.
But MongoDB is up against the historic dominance of Oracle in the commercial database market. It also competes with deep-pocketed cloud services providers including Amazon, Google and Microsoft.
MongoDB, like Cloudera, was a so-called down round IPO whereby pre-IPO investors had previously invested at a higher valuation. However, MongoDB’s aftermarket gains largely erased that shortfall.
In December 2014, MongoDB sold 4.8m Series F shares to nine accredited investors, including VC firm New Enterprise Associates, at the equivalent of US$33.44 per share, valuing the company at about US$1.7bn.
The final IPO price gave MongoDB a market capitalisation of US$1.2bn, though it finished its debut session with a market value of nearly US$1.6bn.