Rubrik staged a solid NYSE debut on Thursday having priced its US$752m IPO above the range, yet the deal lacked the exuberance – and lofty multiples – of the software IPOs of 2021 as investors remain cautious about unprofitable companies.
An order book that was more than 20 times covered helped the Microsoft-backed cybersecurity software company price the sale of 23.5m shares at US$32 each from a US$28–$31 marketing range.
In Thursday's debut, the shares opened up 20.6% at US$38.60 before pulling back to close at US$37 for a day-one return of 15.6%.
Rubrik's syndicate led by Goldman Sachs, Barclays, Citigroup and Wells Fargo concentrated 50% of the stock with the top 10 investors and 70% with the top 25.
"It's not 2021 but it was a very strong book," an ECM banker said.
Tech ECM bankers were hoping Rubrik's IPO, only the second since 2021 when the sector delivered 50 new listings, might help bring more unicorn IPO hopefuls out of the woodwork.
Yet filings remain sporadic as most high-profile software firms that are considering going public await better valuations.
Multiples
The final terms gave Rubrik a fully diluted market cap of around US$6.6bn and an enterprise value of US$6.4bn, an implied forward EV/revenue multiple of around six times that represents a large discount to the high-growth comp set trading at an average of nine to 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 "everybody looked at it".
Marketing software firm Klaviyo went public in September at a forward multiple of around 10 but its stock now trades more than 20% below the mark at which it went public.
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. According to Meritech Capital, multiples are as much as 70% below 2021's highs.
Underlining that change, last week saw HashiCorp, which completed one of the last software IPOs in 2021, agree to its acquisition by IBM at US$35 per share, well down from its US$80 IPO price that was reportedly 35 times forward sales.
Positive marker
Rubrik's IPO was still a positive marker for the tech IPO recovery because investors were prepared to "step out on the risk spectrum", the banker said.
Investors participated in the IPO even though Rubrik made a net loss of US$354.2m last year and is not expected to turn profitable until late next year – 12 years after it was founded.
Marketing focused on Rubrik's 47% growth in annual recurring subscription revenue, even though much of that growth came from customers migrating from perpetual or subscription-based licences to its cloud-based security software.
Because of this migration, Rubrik's overall top line grew only 5% last year, though analysts expect 35%–40% top-line growth in the year ahead – better than most publicly traded software companies.
Rubrik did not, however, satisfy the so-called Rule of 40, that the sum of a software company's profit margin and revenue growth should exceed 40 as an indicator they are efficiently run.