The public debut of cloud software company Zendesk was already set to make waves.
Now, the heat has been cranked up on this public offering, which is expected to happen Thursday, and could offer a barometer of the stock market and tech industry. It is also poised to set the tone for IPOs for the remainder of the year, including major public offerings from Box and Alibaba.
Since the San Francisco company filed its IPO paperwork on April 10, Wall Street has faltered and the IPO market has slowed. The stocks of more than half the U.S. companies that have gone public this year are trading below their IPO prices, and software in particular have taken a beating, with companies like Pleasanton-based Workday seeing shares fall nearly 30 percent from March to May. The tumult in the market has led cloud software rival Box, which filed for an IPO in March, to wait to price shares.
The success of Zendesk’s first day of public trading may help settle the markets and renew investors’ confidence. It will also help dictate when companies such as Box and Alibaba, whose market entry is being carefully watched, will decide to price shares and make their Wall Street debut.
Founded in 2007, Zendesk provides cloud-based software-as-a-service, or SaaS, for companies to answer customers’ questions, and manage customer support, such as through email, chat, voice, social media and websites.
The company is considered a safe bet by some investors; its financials show strong growth and it’s planning to raise about $127.8 million from the IPO — a downward revision from its $150 million filing price. That’s a change from the recent pattern of questionably high valuations, and a mere drop in the bucket compared to Facebook’s $16 billion IPO and Alibaba’s expected $20 billion IPO.
According to financial filings, Zendesk has 42,000 customer accounts in about 140 countries. Its revenue for 2013 was $72 million, more than double the revenue for 2012 and a 362 percent increase from 2011. The company is not yet profitable. Diluted per-share value grew from 49 cents in 2011 to $1.04 last year.
If Zendesk makes a splash on Thursday, it could mean Box, Mobile Iron and others just behind in the IPO queue will begin trading before the end of the year, and perhaps even by the end of summer. But if the IPO goes off track and Zendesk’s prices plummet, then Silicon Valley may be stuck in a cooling-off period — no matter how hot temperatures get outdoors.