The end of the third quarter has become the first act in an IPO screenplay, with Alibaba and Twitter expected to be the scene-stealing conclusion.
Violin Memory and RingCentral are the latest valley tech firms to drag millions of dollars from Wall Street to Silicon Valley, exercising initial public offerings worth more than $250 million combined one week after FireEye and Rocket Fuel commanded a total of $420 million. They begin trading Friday, adding to the prologue for Chinese Internet giant Alibaba and San Francisco social-media outlet Twitter, both of which have the intention of filing to enter the U.S. public market but have yet to officially file for an IPO.
The newly public companies are entering the market during “by far the best year” for IPOs since the financial crisis, according to Nasdaq’s head of new listings, Nelson Griggs. “You’ve got to ride it while it’s hot, and right now, it’s a very good market,” he said after last week’s fireworks.
San Mateo cloud-communications company RingCentral sold 7.5 million shares at $13, raking in $97.5 million at a valuation of $887 million and commanding the top of its proposed range. Storage-hardware firm Violin priced its share in the middle of the range it expected at filing time, selling 18 million shares for $9 apiece, which values the company at $898.4 million while shipping $162 million to Mountain View.
Both companies are expected to begin trading Friday morning, just as FireEye and Rocket Fuel did last Friday, when their share prices doubled at times after the enterprise-software firms charged more for shares than they originally expected. Those stocks have maintained their market caps through their first week: FireEye closed Thursday up 108 percent from its IPO price at $41.63, while Rocket Fuel was up 90 percent to $55.09.
Since those companies debuted, Alibaba — a Yahoo (YHOO)-funded Chinese Internet giant that could challenge Facebook’s record valuation for a tech company — signaled a switch from Hong Kong to the United States for its public debut, adding to excitement sparked when Twitter announced in early September that it had filed privately for an IPO. Those offerings could come by the end of the year.
RingCentral, which will trade under the symbol RNG, fits a similar mold to most of the successful Silicon Valley IPOs of the past two years, including FireEye and Rocket Fuel, offering a cloud-based solution to a business problem. The company, led by founder Vlad Shmunis, installs cloud communications systems that funnel businesses’ phone calls through a multitude of devices to reach workers on the go or at their desk.
By striking a partnership with AT&T and expanding their customer base to more than 300,000, RingCentral has managed to steadily grow revenues from $50.2 million in 2010 to $78.9 million in 2011 to $114.5 million in 2012. That growth has produced growing losses as well, however, with a net loss of $7.3 million in 2010 increasing to $13.9 million in 2011 and $35.4 million in 2012. In the first six months of 2013, RingCentral lost $23.9 million on revenues of $66.7 million, according to its regulatory filing.
Violin Memory, which will trade under the symbol VMEM, is a storage company that focuses on solid-state drives utilizing flash memory. The 8-year-old company rode a contract with Hewlett-Packard (HPQ) to large revenue gains in its fiscal 2012, when sales increased from $11.4 million to $53.9 million; however, HP severed that contract, and Violin noted in its prospectus that the company’s purchases accounted for 65 percent of its revenues in 2012 and less than 10 percent in 2013.
The company’s 2013 fiscal year, which ended Jan. 31, showed the strain of that severed relationship: Revenue gained at a lower rate to $73.8 million while the company’s net loss more than doubled from $44.8 million to $109.1 million.
Seven Bay Area companies filed to go public in August, hitting a sweet spot last enjoyed ahead of Facebook’s record-breaking debut in May 2012. Five Prime Therapeutics, a South San Francisco biotechnology company, joined Milpitas-based FireEye and Redwood City’s Rocket Fuel last week, making it the first week with three Bay Area IPOs since Splunk, ProofPoint, and Infoblox went public in Facebook’s 2012 headwind. The feat repeated itself this week: Pattern Energy, a San Francisco wind-energy company, sold 16 million shares for $22 apiece, bringing in more than $318 million before launching Friday morning on the Nasdaq under the ticker symbol PEGI.
To follow the first day of trading for RingCentral and Violin on Friday, go to www.siliconvalley.com.
Staff writer Peter Delevett contributed to this report. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/jowens510.
