Medallia stock goes live on NYSE
On Friday, the stock of enterprise software company Medallia (MDLA) went live after its IPO. In its first day of trading on the NYSE, Medallia stock surged 76%. Medallia joins the line of several software IPOs that launched this year, including Zoom Video Communications (ZM), Pagerduty (PD), Slack, and Pinterest. Before we go into the details of the IPO, let us first understand Medallia’s business.
What does Medallia do?
Medallia offers software that helps an enterprise manage customer experience and feedback. It has got itself some big names as customers like Vodafone, IBM, Samsung, and Delta Airlines. In the year ending January 31, Medallia’s revenue and customer base increased by 20% YoY. It earned 79% of its revenue from subscriptions, making its revenue more stable and predictable. While its revenue rose, its losses widened to $82.2 million.
The Medalia IPO
Small-cap investors focus on revenue. Medallia increased its IPO stock price by 23.5% to $21 and also increased its share offering by 7.5% to 14.32 million shares. After adding shares available to underwriters, the company raised $326 million from this IPO. At present, it has 121.6 million outstanding shares, which brings its market valuation to ~$2.55 billion.
Before Medallia, competitor SurveyMonkey raised $180 million in IPO and went public in September 2018. SurveyMonkey stock is currently trading near its IPO price. Another rival Qualtrics also filed for an IPO in January but was acquired by SAP for $8 billion on January 23.
Enterprise software firms versus consumer software firms
Medallia’s IPO response shows that investors still have an appetite for software firms, especially enterprise software firms. An article in the Wall Street Journal stated that enterprise software companies perform better than consumer tech companies. It analyzed data from Dealogic and found that around 50 enterprise software companies and 13 consumer tech companies have gone public in the United States since 2016. The data showed that stocks of enterprise software companies reported a median growth of 126% from their IPO price as against consumer tech firms’ 15%.
Business video conferencing software firm Zoom’s stock rose more than 50% from its IPO price. Incident management platform PagerDuty’s stock rose 20% from its IPO price. Stocks of consumer tech companies like Dropbox and Slack Technologies are trading below their IPO price. These consumer tech companies are having difficulty competing with giants like Facebook, Google, and Netflix. It remains to be seen how Medallia’s stock performs.