This week has has brought two tasty pieces of IPO news with it: Rackspace's return to public markets and BigCommerce's debut will be much more interesting now that we know what a first draft rating looks like for each.
But among the numbers there is a question that is worth answering: because they are not Rackspace focused on the cloud and BigCommerce that powers e-commerce is it worth more?
Using a basic stock count and the upper limit of their initial ranges, Rackspace aims for a valuation of around $ 4.8 billion and BigCommerce at a price of $ 1.3 billion. Given that Rackspace had $ 652.7 million in revenue in the first quarter of 2020 and BigCommerce raised $ 33.2 million in the same period, we have a puzzle in our hands.
Let me explain. To his IPO price, Rackspace is worth about double its current revenue execution rate. For a company we associate with the cloud, it seems cheap at first glance. And BigCommerce is evaluating an evaluation of about a little less than 10 times its current annual rate, which is light compared to its competitor Shopify current price / sales ratio of 66.4x (for YCharts data).
We made some calculations to understand what's going on anyway. The mystery comes down to fairly mundane margins and growth considerations. Let's dive into the data, find out what's going on and ask ourselves if these companies aren't heading towards a second higher IPO price range before they formally evaluate and start trading.
Margins and growth
We unpack the Rackspace IPO price first and the second BigCommerce number set.
Rackspace
While Rackspace has a public cloud component, its core business is service driven, so it's not an important cloud platform in competition with Microsoft Azure, Google's GCP or Amazon AWS. This is not a diss, mind, but a categorization point.
The company has three reporting segments:
- Multicloud services
- App and cross-platform
- OpenStack Public Cloud
