CrowdStrike Holdings Inc. filed for its long-awaited initial public offering Tuesday, joining a surge of 2019 tech IPOs by companies that have commanded huge valuations from private investors but have largely lacked cybersecurity offerings.
The Sunnyvale, Calif.-based cybersecurity company said in a filing with the Securities and Exchange Commission that it plans to raise up to $100 million, but that figure is usually used as a placeholder and is subject to change. CrowdStrike plans to list under the ticker “CRWD” on the Nasdaq exchange, with Goldman Sachs, J.P. Morgan, Bank of America Merrill Lynch and Barclays listed among the underwriters.
CrowdStrike will follow a spate of so-called unicorns joining the public markets from Silicon Valley this year, a Wall Street parade that has included Uber Technologies Inc.
, Lyft Inc.
, Pinterest Inc.
and Zoom Video Communications Inc.
Cybersecurity offerings have slowed down this year, though. So far, only one other cybersecurity company has gone public in 2019, Tufin Software Technologies Ltd.
, and that was a small offering compared with the security IPOs of 2018. Last year, Carbon Black Inc.
went public around this time, with shares pricing at $19 apiece and surging 26% on their first day of trading. The stock price has spent the past eight months below its IPO price, but gained 2% Tuesday to $19.07. Cybersecurity companies Zscaler Inc.
also went public in 2018.
Over the past 12 months, the ETFMG Prime Cyber Security
has crept up 5%, only slightly better than the 4.4% gain by the Nasdaq Composite Index
and the 3.8% gain by the S&P 500 index
Here are five things to know about CrowdStrike from its SEC filing.
A unicorn that was ready to go
Founded in 2011, CrowdStrike has raised $481 million to date, most recently a $200 million round in June that gave the company a valuation of about $3 billion. Back in September, CrowdStrike Chief Executive George Kurtz had told MarketWatch that the company was at a size and scale that it could go public at any time.
Dual-class shares give VCs and CEO control
CrowdStrike will offer class A shares, which will have one vote each, while giving insiders class B shares, which will have 10 votes a share. As of Jan. 31, 458 stockholders own 178.7 million of the Class B shares outstanding.
The largest Class B holders are Warburg Pincus, with Joseph Landy on the board, owning 30.3% of the company ahead of the IPO; Accel, with Sameer Gandhi on the board, owning 20.3%; CapitalG, owning 11.2%; and CrowdStrike CEO Kurtz, owning 10.5%.
Losses remained steady as revenue nearly doubled
CrowdStrike reported a loss of $140 million on revenue of $249.8 million for the year ended Jan. 31, compared with a loss of $141.3 million on revenue of $118.6 million the previous year. That revenue jump was fueled by subscriptions, with CrowdStrike reporting subscription revenue of $219.4 million for the most recent year, compared with $92.6 million for the previous year, as the number of subscription customers doubled to 2,516 from 1,242.
Plenty of competition in a hot field
CrowdStrike prides its Falcon security platform as the “first multi-tenant, cloud native, intelligent security” Software-as-a-Service platform, but it deals in a crowded security marketplace.
According to CrowdStrike, competitors include McAfee Inc. and Symantec Corp.
which offer traditional antivirus protection; alternative endpoint security providers such as Carbon Black and privately held Cylance Inc.; and network security providers like Palo Alto Networks Inc.
and FireEye Inc.
Sales and marketing expenses are considerable but falling vs. revenue
In the year ended Jan. 31, 2017, CrowdStrike reported sales and marketing costs of $53.7 million, more than the revenue of $52.7 million it took in for its 450 subscribers that year. Since then, sales and marketing costs ate up 88% of revenue the next year, and then 69% in the most recent year.