Based in Detroit, MI, Covisint (COVS) scheduled a $64 million IPO with a market capitalization of $264 million at a price range mid-point of $10 for Thursday September 26, 2013.
Twelve IPOs are scheduled for this week. The full IPO calendar can be found at IPOpremium
S-1 filed September 11, 2013,.
Manager, Joint Managers: Credit Suisse; Pacific Crest Securities; Evercore
Summary
COVS provides a leading cloud engagement platform for enabling organizations to securely connect, engage and collaborate with large, distributed communities of customers, business partners and suppliers. two-thirds of revenues are from subscriptions.
Revenue was up 17% to $24 for the June '13 quarter, versus the June '12 quarter. 59% of revenue is from the auto industry. 35% of revenue is from GM. COVS is trying to expand its business into the healthcare segment.
COVS was marginally profitable for the June '13 quarter after showing a steady stream of losses.
Valuation
Valuation Ratios | IPO Mrkt | Price / | Price / | Price / | Price / | % offered |
annualizing June 6 mos '13 | Cap (MM) | Sls | Erngs | BkVlue | TanBV | in IPO |
Covisint (COVS) | $364 | 3.8 | -19.4 | 3.7 | 7.5 | 18% |
Retained deficit of -$8 million.
Conclusion
Buy COVS on the IPO because COVS's price-to-sales is 3.8. Cloud-based subscription companies sell at higher multiples, but one-third of revenues are attributable to GM.
To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above:
Business
COVX provides a leading cloud engagement platform for enabling organizations to securely connect, engage and collaborate with large, distributed communities of customers, business partners and suppliers.
Revenue was up 17% to $24 for the June '13 quarter, versus the June '12 quarter. 59% of revenue is from the auto industry, and 35% of revenue is from GM.
94% of revenue comes from 150 core customers.
Compuware (OTCPK:CPWR), $2.4 billion market cap, is the parent and owns 100% of COVS pre-IPO.
The COVS platform is pre-built with vertical-specific data types, identity frameworks and workflows that minimize the need for customization, speed time to market and generate a comparable competitive advantage.
Intellectual Property
COVS holds a patent in the U.S. on its core technology, in the context of an industry-wide business-to-business exchange. This patent will expire in 2028.
Competition
The overall market for enterprise cloud-based platforms and solutions is emerging. COVS's primary competition currently comes from internal IT groups and established systems integrators. COVS believes that competition fits into the following categories:
Systems integrators, such as IBM, Hewlett-Packard and Dell;
Cloud-based platform vendors, such as Salesforce.com and Microsoft Azure;
Business-to-business integration and data exchange vendors, such as GXS and Sterling Commerce, a division of IBM; and
Internally developed solutions.
5% stockholders pre-IPO
Compuware, $2.4 billion market cap: 100%
Use of proceeds
COVS expects to net $58.5 million in IPO proceeds, which are allocated toward working capital and general corporate purposes.
Disclaimer: This COVS IPO report is based on a reading and analysis of COVS's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
