Blend Labs (BLND) IPO Is Coming Soon and It Looks Pricey

Blend Labs (BLND) has disclosed the terms for its IPO. The company plans to raise about $340 million in the offering. Is BLND IPO stock a good buy for investors? What can investors expect after the IPO?

Founded in 2012, Blend Labs offers a digital banking platform with a focus on mortgage lending. The San Francisco-based company seeks to take advantage of the surge in demand for online financial services. Blend’s existing investors include Coatue, Formation8, General Atlantic, Greylock Partners, and Tiger Global.

Blend Labs plans to offer 20 million shares at $16–$18 per share. The net proceeds from the offering will be used for general corporate purposes, including debt repayment, capital expenditures, and working capital.

Blend Labs hasn’t officially disclosed its IPO date yet, but several reports indicate that it could come as early as July 16. Goldman Sachs, KeyBanc Capital Markets, Truist Securities, Allen & Company, Wells Fargo Securities, and UBS Investment Bank are the underwriters for the IPO. The underwriters have the option to purchase an additional 3 million shares at the IPO price.

Blend Labs has reported net losses in each financial year since its inception. The company reported a net loss of $74.6 million in 2020 compared to $81.5 million in 2019. Its revenue rose 90 percent YoY (year-over-year) to $96 million in 2020 and 104 percent YoY to $31.9 million in the first quarter of 2021. As of March 31, 2021, the company had $57.3 million in total liabilities and $352.3 million in cash and cash equivalents.

The IPO will value Blend Labs at $4.5 billion, and its terms put the company’s 2020 price-to-sales multiple at 47x. Considering that peers LendingTree and Rocket Companies are trading at next-12-month EV-to-sales multiples of 2.9x and 3.2x, respectively, Blend stock looks overvalued.

Blend Labs stock will trade under the ticker symbol “BLND.” The stock will be listed on the NYSE. The company is offering IPO shares at $16–$18.

The outlook for Blend stock looks promising. Mortgage insurance demand has increased due to the low interest rates amid the COVID-19 pandemic. Blend thinks that its serviceable addressable market size is worth more than $33 billion.

Blend offers a digital-lending platform used by major financial institutions and banks, including Wells Fargo, Truist, and PennyMac, to provide consumer and mortgage loans. In 2020, the company’s software platform helped its 291 clients process almost $1.4 trillion in loan applications.

Approximately $5 billion in transactions are processed through Blend’s platform on an average every day. Blend’s 162 percent dollar-based net retention rate suggests it can upsell existing customers. Overall, Blend stock is a good long-term investment but not at this price.

Blend Labs shares can be bought using a traditional or online discount broker like Robinhood.