After many false dawns and rumors, Nutanix has finally set the price and date of its IPO on the Global NASDAQ exchange. Its initial offering is to be 14 million common class A stock and an initial price of between $11 and $13. The expected IPO date is September 30, and it will have the symbol NTNX.
It seems that Nutanix has finally decided to grow up and discard the startup tag. (Surely even Nutanix can’t keep calling itself a startup after seven years and an IPO, can it?)
First, a brief history. Nutanix was founded in 2009 by current CEO Dheeraj Pandey, ThoughtSpot cofounder and CEO Ajeet Singh, and Cohesity founder and CEO Mohit Aron. They introduced a product that effectively gave birth to a market that has since become known as hyperconverged infrastructure. Their product effectively took a Supermicro 4-node FatTwin Server and utilized the local storage of each node (flash and spinning rust) to present a unified and resilient file system accessible to all four nodes, which were running a hypervisor to provide resources to virtual machines. It is difficult to understand now how revolutionary this concept was.
As a company, Nutanix appears to have gained a reputation for belligerence and never backing down from a fight. Its VCDX cadre (now morphed into the NPX cadre) are on the whole very vocal.
What is interesting is that those have been quiet recently on Twitter. It is almost as though the attack hounds have been put on leashes. I have heard rumors of a peace accord being made between Dell EMC and VMware on the one side and Nutanix on the other. Is this a sign that Nutanix is finally growing up? We hope so.
Why IPO? And Why Now?
Nutanix is a cash burner. It has burned through $172 million in VC capital over four funding rounds, and the current climate is not conducive to a series E funding round, as VC money for storage vendors has plummeted. So, its only way to a further funding injection is via the IPO route.
Nutanix as a company does have a decent revenue stream, as can be seen from its S-1 filings, but it is not profitable. That said, this is not that much of an issue, as can be seen from the following review of its last four quarters and annual revenue growth. Its net losses are rising less sharply and starting to become a smaller proportion of revenues.
Full fiscal year 2016 (ended end-July 2016) quarterly revenues, net losses (in parentheses), and losses as a percentage of revenue
- Q1 – $87.77m (-$38.55m) 43.9%
- Q2 – $102.7m (-$33.2m) 32.33%
- Q3 – $114.69m (-$46.82m) 40.8%
- Q4 – $139.79m (-$49.93m) 35.7%
As revenues hopefully grow, the loss percentage will decrease. However, Nutanix needs this money to continue its growth, as it is not currently organic and still needs fertilizer to move forward. I believe that the IPO will fund the integration of its recent acquisitions of Calm.io and PernixData into its own hypervisor, AHV. Its need for this integration is massive, as it has now released storage-only nodes that will break its paradigm of data locality for running VMs to enhance performance. PernixData’s FVP product is currently for vSphere only and will need massive reengineering to run on AHV.
Here’s hoping for a successful IPO for Nutanix.
On the day of the IPO Nutanix opened at $26.20 rather than at their planned price of $11-13 a share; this was a good early indicator of a vastly oversubscribed IPO. The stock traded briskly with the price surging to a peak of $39.20 on the first days trade. interest continued on day two trading with the price reaching $46.78 before falling back with early profit takers to close at yesterday (10/05) at $38.00. There can be no doubt that this was a very successful IPO and it has generated almost twice as much as was expected. Nutanix are the first 2016 IPO to have hit or exceeded their IPO target, and the first Unicorn to actually live unto their pre IPO expectations.
This could be a good indicator or future Tech IPO’s, but my personal feeling is that this is an outlier. Nutanix are a very visible tech company, one that many outside of the bubble we in tech live and work in have actually heard off. it was this rather than any resurgence in tech stock that stoked this IPO’s blazing fire. it remains to be seen if over the coming weeks and months of trading the stock remains level circa $38 a share, I feel that a small drop back is inevitable, but I do not think that will suffer the ignominy of Violin either.