The first Silicon Valley tech unicorn to be public in 2018 is watching what you may do at work.
?sells cloud security software that lets IT departments monitor most of the traffic on your corporate network while protecting it and (hopefully) your workers. Zscaler\’s pitch focuses on it learning to be a cloud native, while established rivals have had to adapt to \”networks\” becoming distributed global data centers supporting employees who go surfing from a variety of devices to the multitude of apps.
Zscaler is priced its IPO late Thursday at $16, above an already elevated range, according to IPO Boutique. The $16-per-share price values the company at $1.88 billion because it is set to begin trading Friday morning to the Nasdaq exchange under the ticker symbol ZS, though other valuations may very well be higher because they count unvested shares.
Morgan Stanley and Goldman Sachs are the lead underwriters and, with the company, had originally planned to promote 10 million shares for $10 to $12, but recently bumped the cost range to 12 million shares at $13 to $15.
Here\’s exactly what you need know:
Zscaler was privately valued at more than $1 billion in its last round of private funding, according to VentureSource, and is headed for a valuation of more than $1.5 billion at its dpo price this week. After going to sell 10 million shares for $10 to $12 originally, the San Jose, Calif., company moved all those numbers up days killing the sale to 12 million shares and also a $13-to-$15 range. At the midpoint, Zscaler would pull in $168 million within an initial market cap of $1.64 billion, though valuations that count unvested shares is higher
Despite the size of its IPO, Zscaler has largely slipped distinct ahead of debuts from two larger unicorn startups with names that more and more consumers recognize. Music-streaming app Spotify Inc
? and cloud-storage offering Dropbox Inc.
?are predicted to enter the public markets within weeks, additionally, the reaction to Zscaler could indicate appetite for venture-backed startups.
See also: Five what you should know about the Spotify IPO and the Dropbox IPO
Through March 9, 25 U.S. IPOs had raised in excess of $11 billion, according to Ipreo, a market intelligence firm, but volatility in large indexes like the S&P 500
?and Dow Jones Industrial Average
?during early February spooked prospects into suppressing. A small biotech offering, BioExel Therapeutics, broke the dry streak a couple weeks ago, and Zscaler is one of three expected IPOs immediately, Ipreo said.
Zscaler\’s initial valuation would said in the middle third of market caps within the ETFMG Prime Cyber Security ETF
which tracks 45 security companies, placing it near another recent security IPO, the IoT-focused ForeScout Technologies. The provider included a laundry list of potential rivals in the security space in its filings, including Palo Alto Networks Inc.
Check Point Software Technologies Ltd.
F5 Networks Inc.
?and FireEye Inc.
In targeting larger customers and its specific niche of software, Zscaler is facing two formidable challengers in Cisco Systems Inc.
?and Symantec Corp.
?Cisco got such a similar company, OpenDNS, for more than $600 million in 2015, and possesses added other startups in an offering it calls Umbrella.
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OpenDNS founder David Ulevitch runs Umbrella like a senior vice president and gm for Cisco Security now, and then he called the current competition \”a two-and-a-half horse race\” between Cisco, Zscaler and Symantec, which happens to be still rounding into form following your transformational acquisition of Blue Coat Systems Inc. Ulevitch sees a multibillion-dollar opportunity looking for companies move to cloud computing, explaining the main difference between the newer approach for the reason that difference between closed-circuit cameras at a club and a bouncer at the door.
\”Over the next few years, this will become a billion-dollar part of our portfolio,\” Ulevitch said in the interview. \”Zscaler is capturing a similar transition.\”
Ulevitch was complimentary of his adversaries, calling Zscaler \”a really impressive business\” and saying Symantec designed a \”brilliant move\” in acquiring Blue Coat, nonetheless the relationship between Symantec and Zscaler will not appear to be as chummy. Symantec has filed two lawsuits against Zscaler claiming the startup is infringing on its patents, ultimately causing a lot of disclosure in SEC filings-Zscaler mentioned Symantec 58 times in its prospectus, while Cisco was mentioned nine times and various rivals received no more than three mentions.
Zscaler has were able to increase revenue at a solid rate, but its losses are growing as well. Sales grew from $53.7 million to $80.3 million to $125.7 million within the last few three full fiscal years, with recent ending July 31, 2017. Inside first six months of the current fiscal year, Zscaler has accumulated $84.8 million in revenue, compared with $56.2 million in the same period the prior year.
In the same three full fiscal years, Zscaler has recorded net losses of $12.8 million, $27.4 million and $35.5 million, and it also warns that it expects to go on incurring losses for the possible future. In the first six months of the current fiscal year, the company lost $17.9 million, after losing $14.6 million in the same period the prior year.
Many American startups go public which includes a mature business in the U.S. and wants to expand overseas, but Zscaler already gets over half its business from outside the U.S. Actually, the U.S. continues to be its second-largest geographic segment in two of the past three years, behind a variety of Europe, the Middle East and Africa.
Zscaler\’s workforce is similarly constructed, about 52% of workers stationed overseas, as outlined by its prospectus. Zscaler had 950 employees in Jan. 31, more than twice the number it had in 2015.
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The company\’s growth plans are more targeted than a general increase of its overseas presence. It wants to specifically target Japan in hoping to boost its presence in its Asia Pacific segment, that is currently about 8% of its revenue, acquire the best to land federal government contracts in the country.
Zscaler will offer a single class of stock with common voting rights, a rarity for that venture-backed startup of late, but insiders will own much more than 60% of the company after the offering. Us president and co-founder Jay Chaudhry will own about 23% within the company, though an even larger percentage will go into trusts for his family managed using a trustee. Venture investor TPG has the next largest stake, at approximately 8%.
Four directors have collectively offered to buy up to $5 million in IPO shares, in line with Zscaler\’s filing, including former Palo Alto Networks CEO Lane Bess and former Guidewire Software Inc.
Chief Financial Officer Karen Blasing.