ServiceTitan, which provides financial and customer management software for trading, went public on Thursday in a big way, much to the delight of retail investors. The stock quickly soared from its initial IPO sales price of $71 million to $105 per share on modest volume. Currently, the price remains above $100.
ServiceTitan's success doesn't necessarily portend a return to the painfully tight IPO window for tech companies waiting to go public. This is because the company's motivation for going public was not strictly market-related.
ServiceTitan has revealed that it will need to immediately repay some venture investors due to the difficult terms it entered into with them during its previous funding round. In its previous fundraising, ServiceTitan agreed to increase penalties in the form of increased stakes for some investors every quarter if it postpones its IPO beyond May 22, 2024. They disclosed that they paid $84.57 per share, and an analysis by Meritech Capital suggests that ServiceTitan would need to IPO for about $90 per share to avoid these penalties. Additionally, the company used approximately $311 million of the IPO proceeds to buy back all of its non-convertible preferred stock at the price investors paid, $1,000 per share, and to pay a larger dividend.
While the $71 million IPO sale price probably wasn't enough to avoid penalties, it was actually healthy enough to meet many of ServiceTitan's needs. This will allow the company to raise approximately $625 million, which could reach up to $718.5 million if the bankers exercise their full option to buy out all of the allocated shares. Even after the company repays investors, it has a large coffers that it can use for operations, acquisitions, and other needs. ServiceTitan is not yet profitable and needs cash.
But retail investors pushing up stock prices on the first day is still an exciting sign. Some are reacting excitedly, saying the stock's thirst could lead to more IPOs soon. Some say this bodes especially well for fintech companies that have been waiting for the opportunity.
“We expect ServiceTitan's debut to be an encouraging indicator that could prompt other fintech companies in the broader fintech IPO pipeline to follow suit,” said Rudy Yang, senior emerging technology analyst at PitchBook. “There is,” he said.