HashiCorp’s stock surged almost 10% in its Nasdaq debut on Wednesday, as the company’s software assists engineers in setting up computing infrastructure in public clouds and physical data centers.
The company, which goes by the ticker symbol “HCP,” opened at $81.16 per share and closed at $85.19, up 6.5 % from its initial public offering price of $80. Based on the bid price, HashiCorp was valued at roughly $14 billion.
HashiCorp is one of more than 100 technology businesses listed on the U.S. exchange for investors during the Covid-19 pandemic as part of the burgeoning software industry.
Being based in San Francisco, with a workforce of 1,500 people globally, HashiCorp considers itself a remote-first.
Its debut comes when some investors are reducing their cloud stock exposure. Last week, the WisdomTree Cloud Computing Fund dropped over 11%, compared to a 1% drop in the Standard & Poor 500 index. The selling came as Moderna CEO Stephane Bancel suggested that vaccines for the omicron virus type may be less successful than prior Covid versions, and Federal Reserve Chairman Jerome Powell discussed plans to wind down asset purchases.
In the run-up to IPOs, many I.T. companies provided greater ranges after issuing an early estimate. Still, HashiCorp stuck to its initial range of $68 to $72, which was released on Nov. 29.
According to FactSet, HashiCorp sold 15.3 million shares above the estimated price on Wednesday, making it the fourth-biggest U.S. business software IPO of the year with a netted offering of $1.22 billion, behind UiPath, Qualtrics, and SentinelOne.
HashiCorp’s modest first-day gain contrasts sharply with most high-profile IPOs, which have enjoyed significant first-day gains. For example, Rivian, an electric vehicle manufacturer, soared 29% off the bat last month, and GitLab, a code-sharing site, jumped 35% following its October IPO. Toast, a restaurant technology startup, had an even greater month in September, rising 56%.
HashiCorp’s narrower gains could be due to a decline in shares of newly-public firms as investors exit high-growth equities, or they could be an attempt to maximize the fundraising opportunity rather than leaving money on the table by giving over cheap stock to new investors.
Until earlier this year, Mitchell Hashimoto, the company’s chief technology officer and company’s founder, owned shares worth $1.2 billion at the Initial Public Offering. Armon Dadgar, the company’s co-founder and current CTO, owns a $1.5 billion interest.
The cloud market was choppy while HashiCorp was preparing to go public, and it may be bumpy again next week, but investors are standing behind us, despite the volatility, because they believe the company can play a role in the long-term transition to cloud computing, according to Dadgar.
According to CEO Dave McJannet, the company did not consider delaying its IPO due to the sell-off.
HashiCorp flourished thanks to the growing popularity of its open-source technologies, such as Terraform for infrastructure setup and Vault for password management. The company provides self-service cloud implementations of such tools, and a sales team works with large companies to close transactions, including licensed software for data centers.
Sales increased by 49% to $82.2 million in the most recent quarter. Subscriptions account for over 97 % of revenue, but cloud-based services account for only 7%, despite the fact that this category is expanding far faster than license and support revenue.
As the corporation increased its investments in sales and marketing, as well as research and development, the company’s net loss increased to $22 million from $9.3 million a year earlier.
GGV Capital, Redpoint, Mayfield, and True Ventures are HashiCorp’s investors. Goldman Sachs, Morgan Stanley, and JPMorgan are the IPO’s top underwriters.