PagerDuty Inc. late Tuesday hiked the pricing range of its coming initial public offering, signaling heightened demand for its shares as it joins the stampede of IPOs from tech startups expected this year.
In a Securities and Exchange Commission filing, PagerDuty PD, +0.00% raised the expected pricing for its IPO to a range of $21 to $23 a share, up from its previous range of $19 to $21 a share set on April 1. PagerDuty plans to offer 8.5 million shares and selling stockholders 570,000 shares, while underwriters are being offered options for an additional 1.36 million shares, which could push what the company raises up to $239.9 million.
The IPO pricing would value the San Francisco-based cloud computing company at up to $1.72 billion. The company is expected to begin trading this week on the NYSE under the ticker symbol “PD.” Morgan Stanley, J.P. Morgan, RBC Capital Markets, and Allen & Co. are listed among the underwriters.
Among other tech IPOs, Zoom Video Communications Inc. ZM, +0.00% and Pinterest Inc. PINS, +0.00% are expected to go public the week after PagerDuty, while Lyft Inc. LYFT, -3.97% started trading on the Nasdaq in late March.
So far this year, the Renaissance IPO ETF IPO, -0.26% gained about 32%, while the S&P 500 index SPX, -0.61% has risen 15% and the tech-heavy Nasdaq Composite Index COMP, -0.56% has advanced 19%.
Read: Stampede of the ‘decacorns’: Here are the big-name startups preparing for 2019 IPOs
Here are five things to know about PagerDuty before the IPO:
The company—encouragingly—has nothing to do with pagers
For those who don’t know the company, the name can prompt a doubletake. PagerDuty is a cloud-based platform that allows businesses to improve the constant interplay between software developers and operators—so called DevOps—within their organization and lets them use real-time data to address incidents that occur.
That’s key, because as PagerDuty points out in its filing S-1 filing with the SEC, pretty much every business out there has an online presence that interacts with customers and the ability to adapt quickly to changing customer needs, new software versions, and technical difficulties is crucial to remain competitive.
“Technology infrastructure has expanded to include all software-enabled systems and devices, all generating billions of digital signals in the form of machine data, and all containing information that could impact the customer experience,” PagerDuty said in its filing. “Aggregating these signals, analyzing whether they indicate an incident (an issue or opportunity that requires action), and orchestrating a response in real time is extremely difficult for organizations to do with legacy technologies.”
The company already has a broad customer base including many unicorn startups and former unicorns
At the end of January 31, PagerDuty claimed 11,212 customers world-wide among a broad variety of industries, including one-third of the Fortune 500. The company said that no single customer accounted for more than 5% of its revenue over the past fiscal year.
Customers noted in the S-1 filing include Box Inc. BOX, +0.05% which “uses PagerDuty to help ensure that its services are always available to its customers;” Okta Inc. OKTA, +5.72% which uses the company for “its digital operations to remove friction from the incident response process so that teams can identify, escalate, and resolve incidents;” and anticipated IPO Slack Technologies Inc., which “leverages the PagerDuty platform to orchestrate real-time response across teams to maintain high availability and reliability for its millions of users across the world.”
PagerDuty sees a $25 billion market opportunity of which they have less than 1% now
The company said it estimates about 85 million users in “the developer, IT, security and customer support segments” where it has “less than 1% penetration,” and believes there’s a total market for its services of more than $25 billion.
But, as the company outlines in the risks section of its filing, all of its revenue currently comes from just one product.
“Sales of subscriptions to our On-Call Management product account for substantially all of our revenue,” the company said in the S-1 filing. “We expect these subscriptions to account for a large portion of our revenue for the foreseeable future.”
PagerDuty recorded a loss of $40.7 million, or $1.90 a share, on revenue of $117.8 million in the fiscal year ended Jan. 31, 2019, after a loss of $38.1 million, or $1.91 a share, on revenue of $79.6 million in the same period a year ago.
According to the company, its primary competitors are Atlassian Corp. TEAM, +0.06% with OpsGenie and Splunk Inc. SPLK, +0.05% with VictorOps. It also competes “against in-house solutions and manual processes.”
More than half the company is owned by VC backers
Currently, 69% of PagerDuty shares are held by shareholders with a more than 5% stake in the company, while board members and management hold a collective 16% stake.
The company has raised $173.6 million in venture capital funding from six funding rounds with lead investors including Wellington Management, T. Rowe Price and Accel, according to Crunchbase. Andreessen Horowitz, however, owns the biggest chunk of the company with a 18.4% stake, with Accel owning 12.3% and Bessemer Venture Partners owning 12.2%, according to the S-1 filing.
Chairwoman and Chief Executive Jennifer Tejada owns 6.4% and Co-Founder and Chief Technology Officer Alex Solomon owns 7.1%, according to the filing.
Unlike many recent offerings there will be only one class of voting shares
As of January 31, there were 65.1 million shares of PagerDuty outstanding among 273 stockholders. With the offering, that will rise to 74.9 million shares should underwriters exercise all their options.
Unlike some IPOs, however, there won’t be a dual-class structure for shares when it comes to voting.
“Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders, including the election of directors, and do not have cumulative voting rights,” PagerDuty said in the filing. “Upon the completion of this offering, all of our previously outstanding shares of redeemable convertible preferred stock will have been converted into common stock.”
