This week Pexip launched a virtual roadshow, as it prepares to become the first European company to execute an IPO remotely. That is apt, given the Norwegian firm’s video conferencing solution. But what can we expect from a listing whose boldness during the COVID-19 crisis has taken markets by storm?
Pexip wants to sell 17 million shares at $6.06 each. It will sell a further 17m to bring the IPO’s value to $206m. Amid a pandemic that has set global share prices tumbling, the decision could be viewed as reckless. Pexip hopes massive interest, and the enlistment of pre-signed cornerstone investors, will help stabilize the deal.
Even without Coronavirus, Pexip’s public move could be seen as foolhardy. Last year was stuffed full of tech industry faceplants, as successive unicorns like Uber, Pinterest and Slack—not to mention WeWork’s IPO-that-wasn’t—flopped at the strike of the stock exchange’s bell.
Combine that with a conferencing market that despite COVID’s user boom is becoming increasingly congested, and it seems Pexip CEO Odd Sverre Ostlie may have bitten off more than he can chew. Even with a 50% annual growth surge, Pexip enjoys just $56.7m in contracted annual recurring revenue. Last year’s total revenue was $36m.
Key competitor Zoom took $188.3m in revenue last year. And with Microsoft Teams and Google’s Meet projected to carve out significant market share post-COVID, Pexip could be an IPO to forget.
Yet Pexip’s security-minded platform is a favorite of big business and government. Spotify, the US Military and German government—among many others—prefer it to Zoom. And, as Ostlie told Reuters last week, “this lockdown period is a big change for society as a whole and we believe for the finance industry and for IPOs it is a super efficient way of doing interactive meetings.”
Red Herring isn’t holding out for a blockbuster listing. Zoom’s star may be falling, and corporates are looking for added security in difficult times. But Microsoft and Google’s surges will dent Pexip’s profits. And despite what the company may say, the world isn’t quite ready for a work-from-home revolution when the pandemic dies. Expect a solid first day, with a steady dip thereafter.