🎉 Is Freshworks The New Trendsetter?
BlackBerry beats estimates; FedEx tanks.
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🎉 Freshworks: Trendsetter?
San Mateo, California-based Freshworks Inc. (FRSH) debuted on the NASDAQ at a 21% premium over its IPO price of $36. It joins the ranks of other successful tech IPOs that have been well received by investors over the past 18 months, the pandemic notwithstanding. (Tweet This)
Guerilla Tactics!
Founded as "Freshdesk" in 2010 by Girish Mathrubootham and Shan Krishnasamy, the company was founded in Chennai and then shifted headquarters to Silicon Valley. This is quite the opposite of traditional SaaS companies established in the US and getting their software development done in India.
Accel Partners was one of the first investors in Freshdesk with a $1M investment in 2011. By 2014, the company had raised $31M as part of its Series D round, with Google Capital also chipping in.
In 2017, the company was renamed Freshworks. In July 2018, Sequoia Capital joined the marquee list of investors as it raised $100M in the Series-G round. That same year, Freshworks crossed $100M in Annual Recurring Revenue (ARR).
Salesforce (CRM) was hosting its annual Dreamforce conference for its customers in September 2018. What stole the show was a blimp that circled Salesforce's headquarters, which read "Freshworks" and "Hit Refresh," exhorting potential customers to ditch Salesforce's "bloated software."
A few months prior, marketers of Freshworks gate-crashed an event being hosted by another rival, ServiceNow. By treating attendees to coffee and breakfast from Starbucks, the company encouraged people to try out Freshservice - its IT service management product.
Booming Valuations
Freshworks had expected to raise $912M through the IPO, selling shares between $28-$32 apiece. Two days before the IPO, it raised the price range to $32-$34 per share and expected to raise $969M at the higher end of the price band. The IPO was finally priced at $36.
The shares were listed at a 21% premium, and by the end of the first trading session, Freshworks had reached a market cap of $12.3B. Just how good of a payday was it for the investors that had backed the company?
In its most recent round, almost two years ago, the company was valued at $3.5B. The company sold 28.5M shares at $36 apiece, higher than its initial price range and even higher than the raised price band. By the time trading ended, the company had a market value of $12.3B.
Today, the company boasts 50K+ clients across 120 countries worldwide, including Bridgestone, ITV, Vice Media, and the Swedish payments firm Klarna. Proceeds from the IPO will be used for general corporate purposes, including working capital and operating expenses, and opportunistic acquisitions.
In the first half of the year, revenue has grown 40% Y-o-Y to $169M. Although the company remains loss-making, the net loss for the first six months shrank to $9.8M from $57M Y-o-Y.
So has Freshworks started a trend of Indian companies transplanting overseas for growth? When startups find clients demanding ever-lower prices, ever more hand-holding, and couple that with a longer sales cycle, it won’t be a surprise they will gravitate to a tried and tested geography that reduces this sort of friction. So the answer might be a very obvious, “Yes!”
Market Reaction
FRSH ended at $47.55, up 32.08%.
Company Snapshot 📈
FRSH $47.55 +11.55 (32.08%)
Newsworthy 📰
Earnings: BlackBerry beats quarterly revenue expectations on cybersecurity boost (BB +2.03%)
Shortage: FedEx drops most in 18 months as labour shortage drives up costs. (FDX -9.12%)
Publicity: Stitch Fix CEO says retailer must spread the word about its direct-buy option (SFIX +15.65%)
Later Today 🕒
Nike Inc. Earnings (NKE)
Accenture Plc Earnings (ACN)
Costco Wholesale Corp. Earnings (COST)
Darden Restaurants Inc. Earnings (DRI)
Vail Resorts Inc. Earnings (MTN)
Scholastic Corp. Earnings (SCHL)
Rite Aid Corp. Earnings (RAD)
6:00 PM IST: Initial Jobless Claims
7:15 PM IST: Markit Manufacturing & Services PMI
Today's Market Terminology: Put Option
A put option gives the owner the right but not the obligation to sell or short-sell a specified amount of underlying security. A put option becomes more valuable when the price of an underlying stock decreases
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