Rubrik staged a solid NYSE debut on Thursday, jumping more than 20% in its first trade after raising US$752m, but still commanding a much lower valuation multiple than software new issues priced during the last frenetic cycle.
Marking the first software IPO of the year and only the second one since late 2021 (a year that brought more than 50 from the sector), the cybersecurity software firm's shares opened at US$38.60, or 20.6% above the offering price.
Late on Wednesday, a syndicate led by Goldman Sachs, Barclays, Citigroup and Wells Fargo priced the sale of 23.5m Rubrik shares at US$32.00, above the US$28-$31 marketing range.
The offering, which was north of 20-times covered, was modestly upsized from 23m shares at launch.
The top 10 investors took 50% of the offering's shares.
"It's not 2021 but it was a very strong book," one ECM banker said.
The final terms gave Rubrik a fully diluted market cap of around US$6.6bn and valued Rubrik at an EV/revenue multiple of around 6 or a more than a three-turn discount to a high-growth comp set trading at 9-10.
"On valuation, the company was very reasonable to start with and that created the momentum to push on it and the ability to price above range," the banker said, noting the valuation ensured that "everybody looked at it".
Many of 2021's hottest subscription software IPOs went public at forward EV/revenue multiples of more than 20 and, in some cases, more than 30. One of the last software IPOs to price in 2021, HashiCorp, is getting taken out by IBM at US$35 per share versus its US$80 IPO price (reportedly 35-times forward sales) struck in December 2021.
Despite much lower sector valuations, Rubrik's IPO was a positive marker for the tech IPO recovery because investors were prepared to "step out on the risk spectrum", the banker said.
A specific reason for the wide discount is that Rubrik is losing money and does not expect to turn profitable until late next year.
The VC-backed company, founded in 2013 and now serving 6,000 customers, made a net loss of US$354.2m last year.
The marketing effort instead focused on Rubrik's 47% growth in subscription revenue, even though about 60% of this growth came from existing customers migrating from perpetual licenses with maintenance contracts to its new cloud product.
Because of this, Rubrik's overall top-line grew only 5% last year, though analysts expect 35%-40% growth in the year ahead or better than most publicly traded software firms.