IPO: Things to know as Crowdstrike makes a scintillating market debut

You have probably heard about Crowdstrike already. It has previously unraveled a few high-profile hack incidents, including tracing the 2016  Democratic National Committee email leak to Russia. It has also revealed the source of 2014 Sony Pictures hack to North Korea, besides helping law enforcement agencies nab the culprits in Chinese espionage on the US.

The cybersecurity firm’s success in these cases has given it enough good PR and media coverage, that it could actually afford to cut down on its marketing costs! Not joking. The company’s sales and marketing costs as a percent of total revenue declined to 69% in fiscal 2019, from 88% a year ago. Quite impressive.

The good PR appears to be still resonating in the Wall Street as the company on Thursday managed to price its shares above the expected range of $28-30. Eighteen million shares of Crowdstrike will be floated on Nasdaq today under the ticker symbol CRWD for $34 apiece, raising a total of $612 million.   

Class A shares will be offered to the public, while Class B shares with voting rights will mostly be controlled by current investors and executive directors. Warburg Pincus, a private equity firm, is the largest Class B shareholder with around 30% stake at the time of the offering.

Crowdstrike, founded in 2011, specializes in analyzing user behavior in various devices of a network, and uses this data to identify malicious interferences and cyber threats.

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According to the company, its automated threat detection solution can come up with as many as 2.3 million decisions in a second’s time. It’s software, meanwhile, is claimed to have the capacity to successfully finish over 100 billion jobs in just a day.

Headquartered at Sunnyvale, California, the company currently has 1,455 employees.  

Crowdstrike also has an enviable customer base, including 44 Fortune 100 companies. Amazon Web Services and Credit Suisse are among the most popular clients of the company.

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All these facts give enough reasons for bulls to believe in the stock. However, it may be noted that the company continues to report massive losses as it uses up most of the cash to improve its client base. The company reported loses of $140 million in fiscal 2019, even though it had revenues of around $250 million during this period.

Increasing competition in the cybersecurity space also poses a lot of uncertainty as to who will maintain a leadership position. Crowdstrike’s competitors include Blackberry-owned Cyclance, Zscaler Inc (NASDAQ: ZS) and Tenable Holdings (NASDAQ: TENB) and Carbon Black (NASDAQ: CBLK), McAfee, etc.

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