First Look At Smartsheet's IPO

Apr. 08, 2018 3:01 PM ETSmartsheet Inc. (SMAR)1 Comment
Gary Alexander profile picture
Gary Alexander
25.31K Followers

Summary

  • Smartsheet, a cloud-based work collaboration software platform, has filed to go public.
  • The Washington-based company has raised over $100 million in VC funding and is expected to hit a valuation north of $1 billion in its IPO.
  • The company's largest pure-play competitor is Atlassian, whose shares have soared over the past year.
  • The company generated $111.3 million in revenues in FY18 at a massive 66% y/y growth rate.
  • Pricing and timing of the IPO are still TBD.

Building on the strength of this year's software IPOs thus far, yet another contender has thrown its hat in the ring: Smartsheet (NYSE:SMAR), a Bellevue, Washington, company that was founded over ten years ago and specializes in workflow and team collaboration software. For now, the company has listed a placeholder figure of $100 million for its IPO, but if prior IPO valuations in the year to date are any indicator, Smartsheet will likely be vying for a much bigger deal.

The first quarter of 2018 brought only a few deals in the software space, but they were successful enough to invite a wave of listings in the second quarter. Aside from Smartsheet, other software deals expected in Q2 this year include the unicorn DocuSign (DOCU), as well as the Dell subsidiary Pivotal Software (PVTL).

Smartsheet hasn't yet outlined its pricing or valuation intentions in its IPO. But based on the valuations of predecessor IPOs this year and Smartsheet's own growth trajectory, it's more than likely to notch the vaunted $1 billion mark in this deal. A quick check-in on how IPO valuations have fared this year: Dropbox (DBX), up 44% since its IPO, is currently trading at 9x forward revenues, while security-as-a-service company Zscaler (ZS) is trading at a mammoth 16x forward revenues. So assuming Smartsheet can generate just 40% revenue growth this year (growth will likely trend much higher, given how robust it was in FY18), it would only take a 7x forward revenue multiple for Smartsheet to crack the billion-dollar mark.

Furthermore, the success of Zscaler's IPO - far more lucrative than both Dropbox and Spotify (SPOT) - has effectively demonstrated that the highest-profile company doesn't necessarily have the biggest IPO pop. In other words, the fact that Smartsheet is a relatively low-profile company that's not really on Silicon Valley's

ChartTEAM EV to Revenues (Forward) data by YCharts

This article was written by

Gary Alexander profile picture
25.31K Followers
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Disclosure: I/we 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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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