8 1 discussion stock market valuation and success response to peers
8-1 Discussion: Stock Market Valuation and Success Response to peers
In your responses to your peers, explain whether you agree or disagree with the assessments of their selected IPOs. Can you identify additional economic and market factors that may have influenced the results of the IPO?
First Peer Post:
Good Evening Class,
When a company decides to make the decision to go from private to public, the “Initial Public Offering” is known as an IPO. A company can have been in business for any length of time before they go public, and “Companies typically issue an IPO to raise capital to pay off debts, fund growth initiatives, raise their public profile, or to allow company insiders to diversify their holdings or create liquidity by selling all or a portion of their private shares as part of the IPO” (Fidelity, 2020).
In 2019, one of the top IPO’s to be looked at is PagerDuty. Working in the technology sector, PagerDuty priced its IPO at $24 a share, and opened for trading at $36.75 (Reddy, 2019). By opening at more than 50% above the IPO price, this gave PagerDuty a valuation of more than $2.75 billion (Reddy, 2019). With an initial target of $19-$21 per share, PagerDuty raised its share price at $24 after a $21-$23 starting price range (Reddy, 2019). The company did value the IPO correctly, and possibly could have raised the price of stocks a bit more since the stock did so well initially.
Having recorded a loss of $40.7 million in 2018 and $38.1 million in 2017, the number of customers paying $100,000 or more a year for the service rose to 228 from 144 in the previous year (Reddy, 2019). This proves the IPO did achieve initial success as well as generate additional value for shareholders. Since PagerDuty is a company uses real-time data to address incidents that occur between its customers and those who operate their systems, with companies being globalized and customers utilizing software all hours of the day, PagerDuty becomes a very valuable company in todays fast paced and online workplace. Many shareholders not only utilize technology but can value those who ensure it is running smoothly, 24/7. Not only was PagerDuty heavily successful upon its IPO last year, but continues to increase value due to the COVID-19 pandemic. Since the majority of companies have become “online only”, it is imperative companies like PagerDuty support those online and notify companies of any errors before users notice and it effects their ability to perform online.
Based on my analysis, I believe the PagerDuty IPO was a success because revenue was up 48% from the year before, and continues to grow (Konrad, 2019). PagerDuty projected revenue for the January 2020 fiscal year of $162 million to $164 million, up 37% to 39% year over year, and is expected to reach $10.3 billion a year by 2023 (Savitz, 2019).
References
Konrad, A. (2019, April 11). PagerDuty Hits $1.8 Billion Valuation At IPO-Here’s Why It Had Doubters Early On. Retrieved from https://www.forbes.com/sites/alexkonrad/2019/04/11/pagerdutys-ipo-values-it-at-18-billion–heres-why-it-had-doubters-early-on/#4354c6ae32b3
Reddy, A. (2019, April 11). PagerDuty, the 3rd unicorn IPO of the year, rockets higher by 50% in its trading debut (PD) | Markets Insider. Retrieved from https://markets.businessinsider.com/news/stocks/initial-public-offering-pagerduty-tech-unicorn-nyse-2019-4-1028104039?utm_source=msn.com&utm_medium=referral&utm_content=msn-slideshow&utm_campaign=bodyurl
Savitz, E. J. (2019, September 24). PagerDuty Stock Extends Its Post-IPO Swoon, but 2 Bulls Stand Firm. Retrieved from https://www.barrons.com/articles/pagerduty-stock-ipo-swoon-bulls-overweight-outperform-51569357224
Witkowski, W. (2019, April 14). PagerDuty stock skyrockets nearly 60% on first trading day after IPO. Retrieved from https://www.marketwatch.com/story/pagerduty-stock-skyrockets-nearly-60-on-first-trading-day-after-ipo-2019-04-11
Second Peer Post:
Good evening class!
I too chose to discuss Zoom’s 2019 IPO. Zoom’s IPO was one of the most anticipated of its year in 2019 along with Pinterest who shortly followed Zoom. Due to an increase in investor demand leading up to the IPO, Zoom priced its share at $36, well above their range of $28-$32 per share. In doing so, Zoom was valued at $9.2 billion! Ahead of its trade on NASDAQ, the stock market was indicating the organization may see a 63% spike and trade at about $59 per share (Picker, L). All facts considered, I believe the company most-certainly valued correctly. The market was predicting the tech-mogul to trade at $59 per share, and the organization began trading at $36 per share, which likely opened the gateway for more investors.
With Zoom’s IPO, the organization was able to add value to its shareholders with a 139% return on investment (These are, 2019). Economic and market factors that may have influenced the success of Zoom’s IPO was their ability to find a niche in a world that has an ever-growing demand for both technology and convenience. Also, the program is user-friendly, easily accessible, and also very easy to use from many devices. Leading up to the current pandemic, many employers have begun to rely on technology to make working remotely more of a reality. Over the last 12 years, there has been an estimated 159% increase in remote work (Hering, 2020). Zoom has made an increase in demand for remote work accessible, affordable, simplistic, and easy to use across many platforms. Based on my analysis, I do believe the organization’s IPO was a great success and occurred at the right moment in time which is also key.
Hering, B. B. (2020, February 13). Remote Work Statistics for 2020: New Norms and Expectations. Retrieved from https://www.flexjobs.com/blog/post/remote-work-statistics/
These are the 10 best-performing IPOs of 2019 so far | Markets Insider. (n.d.). Retrieved from https://markets.businessinsider.com/news/stocks/ipo-news-stocks-10-best-performing-of-the-year-2019-6-1028317884#2-zoom-video-communications9
Picker, L. (2019, April 18). Videoconferencing company Zoom prices IPO at $36 per share, indicates 63% spike on first trade. Retrieved from https://www.cnbc.com/2019/04/17/zoom-prices-ipo-at-36-per-share-source.html
Note: References are need.
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