IPO News: What to look for when cloud computing firm HashiCorp goes public

The technology sector continues to dominate the IPO market even as the exceptionally busy 2021 nears its end, amid a spike in the demand for digital services due to the coronavirus-driven digital migration of business operations. HashiCorp Inc., a San Francisco-based provider of cloud infrastructure solutions, is the latest addition to the tech firms aspiring to go public in the fourth quarter.

$10-bln Valuation

In an official statement submitted to the Securities and Exchange Commission last week, HashiCorp revealed plans to become a public entity by offering its shares in an initial public offering. Once approved by regulators, the stock will trade on the New York Stock Exchange under the symbol HCP. It is reportedly looking to reach a valuation of $10 billion. The lead book-runners in the offering include Morgan Stanley, Goldman Sachs J.P. Morgan, and Bank of America Securities. Meanwhile, the company is yet to reveal the number of shares being offered and the estimated price.

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Read management/analysts’ comments on quarterly reports

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The tech firm, which follows the freemium strategy, will have to compete with industry leaders like Microsoft Corp. (NASDAQ: MSFT) and Amazon (NASDAQ: AMZN) Web Services to gain a foothold in the highly competitive cloud market. The open-source model could give it an advantage — projects are developed with collaborating partners, contributors, and a large user base.

Growing Market

The company has several years of experience in coding and developing tools designed to help customers manage cloud applications effectively. When it comes to revenue generation, HashiCorp looks to monetize the proprietary codes of its open-source products and their hosted versions.

It is estimated that collectively, the market for cloud infrastructure, security, networking, and applications would reach around $73 billion by 2026, which bodes well for the company. Armed with around 2,000 customers, the focus of management’s growth strategy is product innovation and international expansion.

HashiCorp was founded in November 2012 by Armon Dadgar and Mitchell Hashimoto, after whom it is named. Currently led by chief executive officer David McJannet, it offers remote-first solutions for the development and operations of cloud infrastructure. The tools being offered include Terraform for developing cloud infrastructure and Vault for password management. The company’s elite clientele includes the likes of General Motors, GitHub, and Stripe.

Recent Tech IPOs

GitLab, a provider of advanced developer collaboration tools, made its Wall Street debut last month. Earlier, Toast, an expert in automation solutions for the restaurant industry, went public in a highly successful initial public offering.

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In fiscal 2020, HashiCorp’s revenues jumped around 75% to $211.9 million, reflecting strong growth across all the three business segments – License, Support, and Cloud-hosted Services. Meanwhile, net loss widened to $83.5 million or $1.32 per share from $53.4 million or $0.90 per share in fiscal 2019, mainly due to a sharp increase in operating expenses. However, the bottom-line performance improved in the most recent quarter.