AvidXchange IPO Fresh Off the Bell, Stock Looks Promising

Accounts payable software company AvidXchange (NASDAQ:AVDX) rang the bell for its IPO on Oct. 13. The company upped the size of its IPO in the final stretch and ultimately raised more than analysts expected.

Is AvidXchange IPO stock a worthy investment for retail investors following the company's public debut?

AvidXchange raised $600 million in its debut on the Nasdaq Exchange. The company sold 26.4 million shares at $25 per share and hit the high end of the previously estimated $23–$25 range. AvidXchange also sold more shares than expected, up from 22 million.

AvidXchange isn't the only software IPO raising its prices. GitLab is going public and recently raised its IPO target to $702 million for a potential market value of $10 billion.

Thanks to the IPO, AvidXchange is now worth close to $4.9 billion at an enterprise level.

CEO Michael Praeger founded the company in 2000. With more than two decades behind him, Praeger is now at the helm of a multi-billion-dollar operation. His full net worth isn't clear, but based on his ownership stake in AvidXchange, it just got a lot bigger. Praeger owns 14.1 million shares, or 7.4 percent of the company, which amounts to $350 million in equity alone after the IPO.

AvidXchange, which offers accounts payable automation, has a competitor in Mastercard (NYSE:MA). The Mastercard B2B Hub helps businesses optimize invoices and payment processes through accounts payable automation.

However, Mastercard backs AvidXchange. It's helping propel the newly public company to a high ranking for the middle market (companies with annual revenues between $5 million and $1 billion).

Goldman Sachs and JPMorgan served as underwriters for the AvidXchange IPO.

According to the AvidXchange SEC filing, "The majority of businesses continue to operate paper-intensive back offices, particularly in their AP workflows. [...] These manual payment methods are accompanied by complicated and labor-intensive steps to process invoices that are slow, expensive, and vulnerable to error and fraud."

For the six months ending June 30, AvidXchange earned $114 million in revenue, which is a 33 percent increase YoY. The losses shrunk and went from $92 million to $50.6 million.

In July, AvidXchange acquired FastPay to expand its portfolio of automated payments technologies. Praeger said about the deal, "We work hard to identify companies that service specific verticals across the middle market, with an interest in those that have developed and continue to enhance their technologies to better the day-to-day finance operations of its customers."

This is AvidXchange's sixth acquisition. It seems like growth was only a matter of time.

IPO availability can lag during the price discovery process, which means that retail investors often don't get access to a stock for a few hours after the market open. AvidXchange rang the Nasdaq bell on Oct. 13 on the day of its IPO, but the general public didn't get the first bite.

As for whether investors should consider adding AVDX stock to their portfolio, the income statement speaks for itself. However, the heightened price of the IPO could suggest overvaluation. It might behoove investors to hold off and analyze fluctuations once AVDX stock is available to the general public. The early days, weeks, and months of any IPO are prone to volatility.