Plenty of demand for MuleSoft stock
Shares of San Francisco’s MuleSoft began trading on the public market Friday, closing about 40 percent above the $17-per-share price that was set by the company Thursday. MuleSoft, which helps businesses tie software, devices and data together, is the first Bay Area company to go public in 2017.
As of the close of the market Friday, MuleSoft was the second-best performing initial public offering in 2017, said Kathleen Smith, a principal analyst at Renaissance Capital, a manager of IPOfocused exchange-traded funds. There have been 23 IPOs this year, she said.
“We expected to see a lot of demand for MuleSoft, and that is because we haven’t seen an enterprise software company in a while,” she said.
MuleSoft has expanded rapidly, post-
ing $187.7 million in revenue last year — a 70 percent gain over the prior year — though it still recorded a net loss of $49.6 million. One of its biggest clients is CocaCola, which uses the software to integrate its systems with those of its recently acquired company, Unilever.
The company raised $221 million in its IPO.
MuleSoft has entered the stock market at a moment when investors are expressing “healthy concern” about how companies are being valued, Smith said. She pointed to Snap, which is the parent company of Snapchat, whose shares have experienced a 20 percent decline since it went public on March 2. Companies with sky-high growth rates but lackluster financial performance aren’t as attractive to investors as they once were, she said.
“I’d say that Snap is a cautionary tale for investors. It was a highly valued company with a negative gross profit,” Smith said. “The froth quickly blew off of that offering.”
Okta, a security software developer for businesses in San Francisco, filed for an IPO on Monday. In a regulatory filing with the Securities and Exchange Commission, the company said it plans to raise $100 million, though that amount could change as the IPO date draws closer.
While there is a strong interest in MuleSoft’s IPO, some analysts worry about whether it can maintain momentum.
Maureen Fleming, an IDC analyst, said there “really aren’t any unicorns” in the the software integration market now that MuleSoft has fled the pen. (A unicorn is a private company valued at $1 billion or more.) And MuleSoft, because it achieved unicorn status, will carry high investor expectations for growth.
MuleSoft “will start getting dinged down based on anything that is unexpected around growth because they are valued as a growth company,” she said.
MuleSoft could not be immediately reached for comment.
Smith said MuleSoft is poised to grow over the next few years but could get trampled by bigger companies, such as IBM and Oracle, which could offer a comparable service in the near future.
Prior to MuleSoft’s offering Friday, the most recent IPO by a Bay Area company came from semiconductor equipment maker Ichor Holdings in Fremont, which raised $53 million in December.
AppDynamics, a San Francisco company that helps businesses monitor the performance of their applications and data centers, had been expected to be the first IPO from a regional company this year, but Cisco Systems announced plans to acquire it for $3.7 billion on the eve of its late-January planned offering.
MuleSoft’s offering will be an important barometer for other software companies waiting to go public, Smith said.
“Will it follow Snap’s trajectory, down 20 percent from its first-day pop? Hopefully not,” she said.
Trisha Thadani and Dominic Fracassa are San Francisco Chronicle staff writers. Email: tthadani@sfchronicle.com, dfracassa@sfchronicle.com Twitter: @trishathadani, @dominicfracassa