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CrowdStrike IPO: 5 things to know about the cybersecurity unicorn
CrowdStrike Holdings Inc. is set to be valued at nearly $7 billion, joining a surge of 2019 tech initial public offerings by companies that have commanded huge valuations from private investors but have largely lacked cybersecurity offerings.
The Sunnyvale, Calif.-based cybersecurity company late Tuesday priced its IPO at $34 a share, to raise more than $700 million. The price is far above the high end of its $28-to-$30 range that had already been raised from the original $19-to-$23 range.
CrowdStrike CRWD, +67.94% offered 18 million shares with underwriters receiving an option on an additional 2.7 million shares. Should those options get exercised, that would give CrowdStrike 199.4 million outstanding shares, which at $34 a share would give the company a valuation of $6.8 billion.
Goldman Sachs, J.P. Morgan, Bank of America Merrill Lynch and Barclays are listed among the underwriters.
The market valuation increased significantly Wednesday, as the stock rocketed at its open on the Nasdaq exchange. The first trade was at $63.50, or 87% above its IPO price, at 11:28 a.m. Eastern. It has since pared gains slightly to be up 76% in midday trading.
CrowdStrike will follow a spate of so-called unicorns joining the public markets from Silicon Valley this year, a Wall Street parade that has included Uber Technologies Inc. UBER, -0.97% , Lyft Inc. LYFT, +0.22% , Pinterest Inc. PINS, +3.29% and Zoom Video Communications Inc. ZM, +4.03% .
Cybersecurity offerings have slowed down this year, though. So far, only one other cybersecurity company has gone public in 2019, Tufin Software Technologies Ltd. TUFN, -1.10% , and that was a small offering compared with the security IPOs of 2018. Last year, Carbon Black Inc. CBLK, +3.32% went public around this time, with shares pricing at $19 apiece and surging 26% on their first day of trading. The stock price spent the past eight months below its IPO price, briefly breaking above $19 in mid-May, and was last down 5% at $15.68. Cybersecurity companies Zscaler Inc. ZS, +0.04% and Tenable Holdings Ltd. TENB, +1.27% also went public in 2018.
Over the past 12 months, the ETFMG Prime Cyber Security HACK, -0.01% has crept up 2.2%, only slightly better than the 1.1% gain by the Nasdaq Composite Index COMP, -0.52% and the 2,1% gain by the S&P 500 index SPX, -0.33%
Here are five things to know about CrowdStrike from its SEC filing.
A unicorn that was ready to go
Founded in 2011, CrowdStrike has raised $481 million to date, most recently with a $200 million round in June that gave the company a valuation of about $3 billion. Back in September, CrowdStrike Chief Executive George Kurtz had told MarketWatch that the company was at a size and scale that it could go public at any time.
Dual-class shares give VCs and CEO control
CrowdStrike will offer class A shares, which will have one vote each, while giving insiders class B shares, which will have 10 votes a share. As of Jan. 31, 458 stockholders own 178.7 million of the Class B shares outstanding.
The largest Class B holders are Warburg Pincus, with Joseph Landy on the board, owning 30.3% of the company ahead of the IPO; Accel, with Sameer Gandhi on the board, owning 20.3%; CapitalG, owning 11.2%; and CrowdStrike CEO Kurtz, owning 10.5%.
Losses remained steady as revenue nearly doubled
CrowdStrike reported a loss of $140 million on revenue of $249.8 million for the year ended Jan. 31, compared with a loss of $141.3 million on revenue of $118.6 million the previous year. That revenue jump was fueled by subscriptions, with CrowdStrike reporting subscription revenue of $219.4 million for the most recent year, compared with $92.6 million for the previous year, as the number of subscription customers doubled to 2,516 from 1,242.
Plenty of competition in a hot field
CrowdStrike prides its Falcon security platform as the “first multi-tenant, cloud native, intelligent security” Software-as-a-Service platform, but it deals in a crowded security marketplace.
According to CrowdStrike, competitors include McAfee Inc. and Symantec Corp. SYMC, +0.98% which offer traditional antivirus protection; alternative endpoint security providers such as Carbon Black and privately held Cylance Inc.; and network security providers like Palo Alto Networks Inc. PANW, +1.23% and FireEye Inc. FEYE, -0.14% .
Sales and marketing expenses are considerable but falling vs. revenue
In the year ended Jan. 31, 2017, CrowdStrike reported sales and marketing costs of $53.7 million, more than the revenue of $52.7 million it took in for its 450 subscribers that year. Since then, sales and marketing costs ate up 88% of revenue the next year, and then 69% in the most recent year.
https://www.marketwatch.com/story/crowdstrike-ipo-5-things-to-know-about-the-cybersecurity-unicorn-2019-05-14
the docs detailing that are redacted.
https://themarketswork.com/2018/01/15/the-uncovering-section-702-about-queries-independent-contractors-a-new-narrative/
Facebook Shares Tumble After Report Zuckerberg Knew Of "Questionable" Privacy Practices
Shares of Facebook tumbled on Wednesday after emails emerged which appear to show Facebook CEO Mark Zuckerberg's knowledge of questionable privacy practices at the company, according to the Wall Street Journal, citing people familiar with the matter.
Within the company, the unearthing of the emails in the process of responding to a continuing federal privacy investigation has raised concerns that they would be harmful to Facebook—at least from a public-relations standpoint—if they were to become public, one of the people said.
The potential impact of the internal emails has been a factor in the tech giant’s desire to reach a speedy settlement of the investigation by the Federal Trade Commission, one of the people said. Facebook is operating under a 2012 consent decree with the agency related to privacy, and the emails sent around that time suggest that Mr. Zuckerberg and other senior executives didn’t make compliance with the FTC order a priority, the people said. -Wall Street Journal
It is unknown exactly which emails the FTC has requested, or how many relate to Zuckerberg. The FTC launched its investigation in 2018 in the wake of the company's massive 'data harvesting' scandal brought to light by the Cambridge Analytica controversy. In particular, the FTC wants to know if Facebook's data privacy lapses violated a 2012 consent decree the company agreed to.
In one email exchange from April 2012 that has caught regulators’ attention, according to a person familiar with the matter, Mr. Zuckerberg asked employees about an app that claimed to have built a database stocked with information about tens of millions of Facebook users. The developer had the ability to display that user information to others on its own site, regardless of those users’ privacy settings on Facebook, the person said.
Mr. Zuckerberg wanted to know if such extensive data collection was possible and if Facebook should do anything to stop developers from displaying that data, the person said.
Another employee responded to Mr. Zuckerberg’s question, saying it was possible and many developers do the same thing but adding it was a complicated issue, the person said. -Wall Street Journal
And as the Journal notes, that email exchanged happened after the FTC's consent decree had been announced, but prior to it taking effect. "If it had been in effect at the time, the stockpiling of such user data would potentially have violated it. Mr. Zuckerberg’s message seemed to indicate he was aware of that, according to the person who was familiar with the exchange," per the report.
In April, the company said it anticipates paying up to $5 billion to settle the case.
On Tuesday, Facebook said in a statement: "We have fully cooperated with the FTC’s investigation to date and provided tens of thousands of documents, emails and files. We are continuing to work with them and hope to bring this matter to an appropriate resolution."
https://www.zerohedge.com/news/2019-06-12/facebook-shares-tumble-after-report-zuckerberg-knew-questionable-privacy-practices
https://finance.yahoo.com/quote/FB?p=FB&.tsrc=fin-srch
yep the upper mgmt knows what is going on with regards to what they did, just playing the role. The employee's who just work there-sure there are a few-will be quite surprised. Looks like under-priced it intentionally so they could short it and then profit on both sides when the lockups expire. Like Uber, Lyft and many others this year. This one stinks though.
although tis is based on the rules, and you know those just do not get enforced, this is how it should work regarding short positions. I have seen many examples that exist as little as three days after IPO. You can also pay a premium to acquire them if it is a particularly hard one to acquire. have seen premiums as high as 25% in the past.
Is there a time limit that must pass before short sales are accepted for IPOs?
The quick answer to this question is that an IPO, or initial public offering, can be shorted upon initial trading, but it is not an easy thing to do at the start of the offering. First, you have to understand the process of IPOs and short selling.
An initial public offering happens when a company goes from being private to being publicly traded on an exchange. The company and an underwriting firm will work together to price the offering for sale in the market and to promote the IPO to the public to make sure there's interest in the company. Generally, shares in the company are sold at a discount by the company to the underwriter. The underwriter then sells them on the market during the IPO.
When an investor short sells, he or she essentially borrows a stock and repays it in the future. If you do this, you're hoping the price of the stock will fall because you want to sell high and buy low. For example, if you short sell a stock at $25 and the price of the stock falls to $20, you will make $5 per share if you purchase the stock at $20 and close out the short position.
To be able to short a stock, you usually need to borrow it from an institution such as your brokerage firm. For them to lend it to you, they need an inventory of this stock. Here's where the difficulty can arise with IPOs and short selling. An IPO usually has a small amount of shares upon initial trading, which limits the amount of shares that can be borrowed for shorting purposes. On the day of the IPO, two main parties hold inventory of the stock: the underwriters, and institutional and retail investors.
As determined by the Securities and Exchange Commission, which is in charge of IPO regulation in the United States, the underwriters of the IPO are not allowed to lend out shares for short sale for 30 days. On the other hand, institutional and retail investors can lend out their shares to investors who want to short them.
However, only a limited amount of shares would probably be available on the market as the company would've just started trading publicly and the shares may not have been completely transferred. Furthermore, there might be a lack of willingness among investors to lend their shares out to be short sold.
So, while there are regulatory and practical obstacles to doing it, it is still possible to short shares in a company the day goes public.
https://www.investopedia.com/ask/answers/05/062905.asp
wasn't a hack in the grand scheme of it. It was presented as one though.