MuleSoft Inc. IPO: Is this a Setup?
MuleSoft is a software company that provides integration software. The software connects applications, data, and devices. The firm was formed in 2006 and started out as a provider of middleware and messaging services. With time, it expanded its services to include the iPaas for companies. This means various businesses that seek the services of MuleSoft can integrate their data in line with other companies. As a result, companies can better forecast the market as well as work together with firms which may affect the performance of the business such as in distribution channels.
Its current Anypoint Platform of Integration, or API for short, covers thousands of consumers in making their payments. Conversely, the company also provides services to API providers that have their code in the cloud, thereby eliminating the need to generate API codes at every point of the providers give these services. The company has its headquarters in San Francisco.
The company was the first tech unicorn to plan for its offering after Snap’s release at the beginning of this month. On March 16th, the company held its Initial Public Offering, selling each share at the price of $17. This was $1 above the expected range which was $14-$16. MuleSoft sold 13 million shares on Thursday. The new release pegged the company at a valuation of $2.14 billion. The offering caused the company to gain new funding totaling to $221 million. This is a significant rise in the company’s worth, after the last evaluation the company held privately pegged the company’s value at $1.5 billion.
The company began trading on March 17th under the ticker MULE. Incredibly, the company’s stock reached highs of $25.92 and closed at $24.75 a share. This translated to a rise in the shares by an estimated 45 percent.
Despite the clear rises in the company’s stock, questions have been raised. One of them has been, who was the winner in this offering?
First off, it was certainly not the underwriters. The firms working on the deal are entitled to a certain percentage of the revenue generated from the release of companies. Indeed, in some releases, bankers are entitled to as much as 7 percent of income from an IPO. Underwriters usually target a rise of 20 to 30 percent in a company’s stock while they are planning a company’s release. This move follows efforts to show that the company will grow at a stable and manageable pace over the years. A share price of$20 per share for each company would have resulted in this desired effect. Additionally, the fact that the stock rose by such high percentages means there was an opportunity for bankers to get more money from the release.
As is typical with most releases, only high net worth individuals with a good relationship to the company, the banks, and other financial institutions usually have access to the price shares at their initial price of $17. In the wake of the sudden improvement, it means that most investors bought shares at the higher price of $24.25.
If this company follows Snap’s trend, it will be trading lower than it currently is in the next few weeks. Snap Inc, is now facing drops in its stock price, although these are still above the IPO price. The company had the same pop in its offering. However, it is currently down by 1.76 percent. Investors who hold out their positions on MuleSoft’s stock could see them buy the shares at high prices only to see them lose value.
However, the performance of this company’s stock will depend on how it fairs against seasoned competitors in the market such as IBM. MuleSoft could use its increasing popularity to bolster its services and clientele, thereby stabilizing the company’s growth.