Netskope to use Nasdaq IPO for CB repayment
Netskope launched marketing Monday of its large US$812.6m all-primary Nasdaq IPO, providing it flexibility to refinance a sizable amount of convertible debt raised privately.
Morgan Stanley and JP Morgan are lead joint bookrunners on the sale of 47.8m new shares marketed at US$15–$17 for pricing after the market close Wednesday, September 17.
Netskope is fast-growing but is losing a lot of money. In the first six months of fiscal 2025, the company posted a US$91.3m operating loss while growing revenue by 30.7% to US$328.5m. At the end of its second quarter ended July 31, annual recurring revenue stood at US$707m.
The IPO would boost cash to US$911.2m.
At the midpoint of the US$15–$17 marketing range, Netskope is targeting a market capitalisation of US$7.5bn, the same valuation it fetched on a US$300m Series H private round in 2021.
Following the Series H round, the company raised US$401m in late 2022 from the sale of a 3.75% payable-in-kind convertible bond. In September 2024, it issued a US$75m 3% PIK CB. Those bonds are convertible at share prices above US$23.75 and US$29.02 and mature in 2028 and 2029.
With interest payments accreted since issuance, there are now US$441.9m and US$76.9m of the 2028 and 2029 CBs currently outstanding – at maturity, those obligations would grow to US$501.3m and US$86.7m.
The convert holders will be able to convert into Netskope shares nine months after the IPO, and the company can call the CBs one year after the IPO.
The CBs do create a funding overhang, but that concern is addressed by the large size of the IPO.
Net the debt and cash, Netskope is targeting an enterprise value of US$7.3bn, valuing it at roughly 10 times revenue forecasted for the fiscal year ending January 31 2026, and 8 times revenue forecasted for fiscal 2027.
Publicly traded cybersecurity peers Zscaler and Palo Alto Networks trade at 12.5 times/10.4 times and 12.1 times/10.7 times EV to revenue for fiscal 2026 and 2027, according to LSEG data.