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3 things GitLab’s IPO wild pricing says about public markets – TechCrunch

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Sitting here waiting in order for GitLab to actually start trading, I’m still digesting the company’s IPO price.

When we first learned about GitLab’s IPO dossier, TechCrunch did a bit of mathematical magic and decided that it was not unlikely that the company would manage to get a valuation of $ 10 billion. dollars in its infancy.

At this price, everyone seemed ready to kill; even the most recent investors in the company would see a rapid return on their final capital in the DevOps unicorn. The company was last valued in private markets at around $ 6 billion in a secondary sale of its shares a year ago, and the last primary price put on GitLab was below $ 3 billion in 2019.

The company exceeded our calculations.

From an initial IPO price range of $ 55 to $ 60, GitLab sharply increased its targets to $ 66 to $ 69 per share. It was no surprise that the company was aiming higher in its IPO prices given that its early numbers looked a bit weak. The size of the gap between the first and second price brackets of the company’s IPO, however, came as a shock.

Then the company came up with a price of $ 77 per share, which once again exceeded its previous valuation estimate.

GitLab’s 143,534,821 shares outstanding at its IPO price were worth $ 11.1 billion. If you do a little more math, the company’s fully diluted valuation is around $ 12.6 billion.

The company’s IPO is therefore a success from the point of view of fundraising and valuation; If the company’s stock rises sharply when it starts trading, blame the poor valuation both on the investment bankers and the former private funders of the old startup who valued the company less $ 3 billion at the end of 2019.

In short, here’s what I think about when considering the price of the company’s IPO:

  • Revenue growth is good, but revenue growth with leading SaaS metrics is divine: It’s not easy to see why GitLab was so far into its first IPO price bracket. There is no one answer. But I think GitLab’s great SaaS metrics have probably helped because they paint the picture of a business with strong growth built into its bottom line. For example, in 2020, GitLab had a net retention of 148%. During the pandemic. That number rose to 152% in the first half of 2021. Slowing down GitLab is going to be difficult, regardless of what happens economically. So, in a sense, net retention is an effective hedge against the macroeconomic downturn. What did not hurt the price of GitLab’s IPO.

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