Nutanix, a Cloud-Based Company, Breaks Records at the Stock Exchange
Nutanix, a cloud-based business, had the strongest first-day gain for a new technology company this year. On its first day of trading on 30th September, its share price more than doubled, creating a record of sorts in a choppy market environment. In fact, its 131% bounce on the opening day is the biggest for any US listing this year.
This California-based maker of hyper converged infrastructure sold 14.87 million shares, more than its anticipated 14 million. It also priced the shares at $16, above the expected price range of $13 to $15, and through this offering, raised about $238 million. Its shares closed at a value of $37, thereby giving the company a market value of $5.08 billion.
This response from the market shows investor’s appetite for tech companies that have a high growth potential, even if its unprofitable now. During the last fiscal year that ended in July, revenue jumped by 84% to $449.9 million, and the company says it has more than 3,700 customers. Despite this growth rate, this seven-year old company has been raking losses, mainly due to its aggressive marketing efforts. It’s net loss during the last fiscal year was $168.5 million.
This IPO sure gives hope for other tech companies that are looking to tap into the public market for capital. It can also be seen as a bright light in an otherwise dismal IPO market. According to Dealogic, only 80 companies have listed in the stock exchange in the first nine months, and this is way less than 143 during the same period in 2015. This fall can be attributed to market volatility, appealing lending rates, and a strong private market – factors that can deter a company from going public.
That said, the next few months are crucial for Nutanix, as many companies that started off well, have seen a downslide after the initial euphoria ends. Of the 32 tech companies that went public since 2012, 53 percent are trading below their market price. Shares of popular tech companies like Square, Box, and HortonWorks are trading almost $5 to $8 lower than their private market valuation. Will Nutanix fall in this list? Depends on the performance of the company, as well as a host of external factors like investor confidence and market volatility.
Nutanix Company Profile
Nutanix is a maker of Hyper Converged Infrastructure (HCI), a technology that combines many computing devices such as storage and backup into a single device using advanced software on an inexpensive hardware. Founded by Dheeraj Pandey, Mohit Aron, and Ajeet Singh in 2009, this company is headquartered at San Jose, California, and sells its products to more than 70 countries worldwide.
It became a “unicorn company”- a term used to describe tech companies that have a valuation of more than $1 billion, in 2013. It is backed by some heavyweight venture capitalists such as Khosla Ventures, Lightspeed Venture Partners, and Fidelity Investments.
This company sells software on its own box, and this accounts for most of its revenue. The remaining revenue comes from companies that use Nutanix’s software to offer better features for their respective products. Server makers like Dell and Lenovo Group, and car-maker Toyota Motors, are some of the companies take advantage of Nutanix’s software.
Its stock symbol is “NTNX.”