Team management software company Monday.com dropped a new IPO filing today. The latest document — an F-1/A, because the company is based in Israel — provides what could be Monday.com’s final pre-IPO pricing notes and details planned investments from both Zoom and Salesforce after its public offering closes.
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Monday.com’s price range of $125 to $140 per share values it north of $6 billion at the top end of its target interval, a steep upgrade from its final private price recorded in mid-2019.
Let’s quickly unpack its IPO valuation range, discuss the private placements that Zoom and Salesforce plan and parse what Monday.com’s IPO news means for the broader public offering window.
Because the company is expected to price tomorrow and trade Thursday, we’re looking at data that could prove final, unless Monday.com manages to push its IPO price range higher or prices above its current estimates. Given the sheer number of IPOs that are either filed or rapidly forthcoming, Monday.com could prove to be a bellwether for the larger unicorn software exit market. Therefore, its debut matters to more than itself, its employees and its venture backers.
What’s Monday.com worth?
There are a few ways to value a company as it goes public. The first is its so-called simple valuation. To calculate a simple price for a debuting entity, we simply multiply the two extremes of its IPO price range by the number of shares it will have outstanding after its debut. That works out as follows in the case of Monday.com:
- Lower bound: $5.47 billion.
- Upper bound: $6.12 billion.
Those numbers rise by $46.25 million and $51.8 million, respectively, if we add in the 370,000 shares that Monday.com is allowing its underwriting banks to purchase at its IPO price if they choose, so a low share count in the company’s greenshoe offering could imply that Monday.com had leverage over its debuting banks. DoorDash, for example, got away with no underwriter bonus shares thanks to its hot public offering.
There’s more to Monday.com’s potential IPO prices, however, because both Zoom and Salesforce’s venture capital arm each expect to purchase $75 million in shares in the company after the IPO closes. That will add $150 million in value to the company at its IPO price.
The transactions add a bit of value to the company, by our read. More importantly, they underscore the Monday.com product vision of connecting apps via no- and low-code software. Zoom and Salesforce are key integration points for any workplace service; to see them in the deal implies that they’ve observed enough demand from Monday.com customers for connections that they want upside, as well as visibility into a company that their own customers are leveraging.
Back to the filing: If we include shares that are “issuable upon the exercise of options outstanding” and “issuable upon the exercise of a warrant,” the company’s share count swells to a result that could provide Monday.com with a fully diluted market cap of more than $7 billion.
Regardless of which number you favor, the company is about to enjoy a massive updraft on its final private price. Per PitchBook data, Monday.com’s July 2019 $150 million investment gave it a post-money valuation of $1.75 billion. Bloomberg notes that some of its investors sold some of their shares at a $2.7 billion value in 2020.
Any investor who sold early threw away a more than 100% upside on their equity. Of course, some funds may have been time-constrained and thus forced to exit, but the gap between their May 2020 conviction in the company and its 2021 value is steep.
Does its IPO price make sense?
Yep. At least for the company and its backers, who are getting what feels like a fair deal.
Provided that Monday.com prices at the top end of its range, its simple valuation of $6.12 billion values the company at around 26x the annualized run rate that it set in the first quarter of 2021. That’s a very solid multiple for any company and underscores that Wall Street anticipates the company’s current pace of growth will continue.
In Q1 2021, Monday.com’s $59 million in total revenue was up just under 85% from the year-ago period. That’s the sort of expansion of high-margin, recurring revenues that investors covet, both private and public alike.
In profitability terms, the company’s rapid growth politely papers over rising its GAAP and non-GAAP operating losses, results that come with an admittedly improved Q1 2021 free cash flow result compared to its year-ago metrics.
Thinking broadly, the Monday.com IPO appears to be an indicator that unprofitable, high-growth SaaS businesses that are not overly profligate can still command historically rich multiples when they debut. That’s just about the best news the unicorn market could hope for.
The only situation that would allow for a more bullish climate for debuts would be one in which even more unprofitable businesses could attract similar multiples. But that would, in your humble servant’s view, constitute a market that was being silly. So, call today’s climate a compromise between digital optimism among the public-market set and some indications of maturity in price discovery.
Monday.com prices in around 30 hours or so. More then, if the company doesn’t raise its range in the interim.
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