Friday, April 20, 2012

A Range of Pops as Three Silicon Valley Firms go IPO This Week

Three firms in Silicon Valley went public with IPOs (Initial Public Offerings) this week, Splunk, Infoblox, and Proofpoint.  All unprofitable.  All fast growing.Was money left on the table, though, with their asking prices?

Splunk (SPLK) is a “big data” company.  Splunk® Enterprise™ collects, monitors, indexes and analyzes the machine data generated by IT applications and infrastructure--physical, virtual and in the cloud.  This machine data   contains a definitive record of all transactions, systems, applications, user activities, security threats, and fraudulent activity.  This data is largely untapped; Splunk helps organizations analyze this data.  Their growth is in part due to its freemium model.  Their first day pop – 109%, closing at $35.48.  They were up another 2% on Friday. 

Infoblox (BLOX) is in the    automated network control space.   Infoblox products automate the business-critical network services required to connect networks, applications, and people.  Gartner estimates that they have about 40% of the DDI market. DDI equals - Domain Name System (DNS), Dynamic Host Configuration Protocol (DHCP) and IP address.  Network acronym soup, so to speak.  Their only profitable year so far was 2010.  Infoblox   stock debuted on the New York Stock Exchange with the ticker symbol BLOX at $22.57, a 41 percent increase over its late Thursday pricing of $16, , and closed at $21.51.  This was a 34.4 percent pop.

Proofpoint (PFPT) is a   security-as-a-service vendor that delivers data protection solutions that help medium- and large-sized organizations protect their data from attack. They've been around since 2002.  Gartner placed Proofpoint in the Leaders Quadrant in its 2011 Magic Quadrant for Secure Email Gateways.  In their IPO priced its shares higher than their initial range, asking $13 a share from investors.  Shares were first offered on the NASDAQ under the ticker symbol PFPT at $16.85, an increase of 29.6 percent, and closed at $14.08, and 8.3% pop over the initial $13 price.

Splunk would seem to be the winner from the perspective of biggest pop.  The flip side is that the smartest guys in the room doing the analysis should  have had a higher asking price.  
You’ve got to look at stories like “The Art of the IPO”, in the Wall Street Journal.  “It's a fine line.  Price your shares too high, and you'll collect a lot of money.  However, the subsequent drop may alienate investors and demoralize your employees.  Price them too low and you'll grab plenty of headlines as your stock soars on takeoff, but you've failed to raise nearly as much as you could have, and the initial buying frenzy may end up costing you some long-term investors.”


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