Please respond to the following two peers:

Going Public

Locate a recent story from The Wall Street Journal or other reputable news source about a company that has gone public through an Initial Public Offering (IPO) within the last year.

• How did the company arrive at the valuation for the IPO? Yes, we know there are multiple valuation methods and also supply and demand based on hype, but what was said publicly by the CEO/CFO and/or the bank that took the company public to defend the initial stock price?
• Was the IPO price justified? How has the price changed since the IPO? Be sure to consider overall market and segment performance to support your position.

1. Thomas Pokorny 

RE: Week 9 Discussion

COLLAPSE

Dr. Lou and Classmates

Locate a recent story from The Wall Street Journal or other reputable news source about a company that has gone public through an Initial Public Offering (IPO) within the last year.

https://labusinessjournal.com/news/2020/sep/21/goodrx-founders-poised-big-gains-ipo/

How did the company arrive at the valuation for the IPO? Yes, we know there are multiple valuation methods and also supply and demand based on hype, but what was said publicly by the CEO/CFO and/or the bank that took the company public to defend the initial stock price?

Before a company going public with an IPO offering, banks and investors could review mathematical financial analysis, which is a quantitative measurement to determine the organization’s value. Another method besides supply and demand for valuating an organization includes the positive and negative qualitative factors of an organization that could decrease or increases the valuation.

Positive and negative qualitative factors are more difficult to measure; however, some factors include customer satisfaction, litigations, reputation, management, and new technologies, such as improving people’s lives (Beers, 1). For example, GoodRx’s private equity firm, Silver Lake Partners, which had one-third stake already, purchased $100 million worth of shares in a private placement (Fine, 2). Private equity firm Silver Lake stated that the proceeds would transform the business to complement its prescription drug business. According to Fine, the private placement will help “Americans get the health care they need at a price they can afford” and become the leading customer-focused digital health care platform (2).

Was the IPO price justified? How has the price changed since the IPO? Be sure to consider overall market and segment performance to support your position.

GoodRx initial IPO offered 23.4 million shares to raise $570 million, and a stock price of approximately $24 per share justifies the IPO. The stock price on opening day was $33.00 per share, with the first-day run-up closing at $50.50 (Bursztynsky, 4). Today, GoodRx is selling at $44.52 per share. Compared to other tech and medical platforms such as Teladoc, which is the leading telehealth company globally, it began trading five years ago at $28 per share. Today, Teladoc is offering a stock price of $221, which pales compared to GoodRx (Warren, 5).

References:

1. Brian Beers, 2020. How to Use Qualitative Factors in Fundamental Analysis. Investopedia
2. Howard Fine, September 20, 2020. GoodRx Founders Poised for Big Gains From IPO. Los Angeles Business Journal
3. Niket Nishant, September 23, 2020. GoodRx shares jump 40% in Nasdaq debut after $1 billion IPO. Rueters. https://www.reuters.com/article/goodrx-hldg-ipo/goodrx-shares-jump-40-in-nasdaq-debut-after-1-billion-ipo-idUSKCN26E31E
4. Jessica Bursztynsky, September 23, 2020. GoodRx closes up 53% in market debut. CNBC
5. Rachel Warren, October 28, 2020. If You Invested $10,000 in Teladoc’s IPO, This Is How Much Money You’d Have Now. The Motley Fool.

.2.David Bediako 

RE: Week 9 Discussion

COLLAPSE

Hello Dr. Lou and classmates,

I chose to discuss Snowflake, a cloud data company that began in 2012 and went public September 2020.  CEO Slootman took the reign in April of 2019 and at the ringing of the market bell on opening day raised $3.4 billion (Konrad, 2). It was originally valued at $1.8 billion only nine months earlier.  The company was valued at $4 Billion when Slootman began and more than doubled the first day (Konrad, 2).With previous success at Data Domain and which he took public in 2007 (and saw shares jump 66%), and another named ServiceNow (Konrad, 2).  

• How did the company arrive at the valuation for the IPO? Yes, we know there are multiple valuation methods and also supply and demand based on hype, but what was said publicly by the CEO/CFO and/or the bank that took the company public to defend the initial stock price?

Armed with a strong narrative CEO history (branded by his my-way-or-the-highway philosophy), Snowflake stood on its product positioning which held it apart from its competitors.  CEO Frank Slootman came aboard touting victories from two previous corporate wins.  Having had success with his previous undertakings, momentum was built with his acceptance of the role at Snowflake.  Adding the ability to offer frictionless services, unlike its competition, Snowflake saw major increases in revenue prior to going public that captured the attention of major players including Warren Buffet’s Berkshire Hathaway investment group (with an initial investment of $250 million) as well as CRM giant Salesforce (Healy, 1).  

Also to its positional benefit, the rapid growth of Cloud services helped to catapult the organization beyond its industry headliners such as Amazon Web Service (AWS), Microsoft Azure, and SAP (Healy, 1).  Analysts comment that the company is performing by the valuation is driven by what they call the Robinhood crowd.  Yet the noted positioning under Slootman has driven its available market from $14 billion to $81 billion (Konrad, 2).

• Was the IPO price justified? How has the price changed since the IPO? Be sure to consider overall market and segment performance to support your position.

I believe the IPO price was not entirely justified but driven by popularity and major attention.  Whereas Warren Buffet’s initial purchase ranged from $60 – $80 per share, the cost jumped and now stands at $272.17 with an A+ rating from Morningstar (and fair market value of $204) (Sharma, 3).  Although Morningstar does not attribute a current Moat to Snowflake, its performance against companies such as Oracle and Google has shown it to be a force to reckon with.  By virtue of Demand, Industry Comparable, Growth Prospects and the Compelling Corporate Narrative, the price appears to have been welcomed although ambitious (Gad, 4).  I believe the strongest point is Snowflake’s product offering with the greatest flexibility and integration capability placed Snowflake as the prospectively superior. 

References:

1. Healy, W. (2021, January 28). Where Will Snowflake Be In 1 Year? The Motley Fool. https://www.fool.com/investing/2021/01/28/where-will-snowflake-be-in-1-year/
2. Konrad, A. (2021, February 27). The Outsider: How CEO-For-Hire Frank Slootman Turned Snowflake Into Software’s Biggest-Ever IPO. Forbes. https://www.forbes.com/sites/alexkonrad/2021/02/01/the-outsider/?sh=32c64cc7702d
3. Sharma, J. B. (2021, February 26). It Must Be Wet Snow, Because Snowflake Software Is Sticking; $204 FVE, Shares Overvalued. Snowflake Inc Ordinary Shares – Class A. https://www.morningstar.com/stocks/xnys/snow/quote
4. Gadi, S. (2020, March 23). How an Initial Public Offering (IPO) Is Priced. Investopedia. https://www.investopedia.com/articles/financial-theory/11/how-an-ipo-is-valued.asp