One of the most active initial public offerings in recent months is still under quiet period rules. Coupa Software Inc (NASDAQ:COUP)‘s 25-day IPO quiet period expires on October 31; following this, the firm’s IPO underwriters will have their first shot at releasing research recommendations on COUP.
The event could result in an uptick in the company’s share price and opens a potential buying opportunity for investors. COUP underwriters include Morgan Stanley, J.P. Morgan, Barclays, RBC Capital; JMP Securities, and Raymond James.
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IPO & Early Market Performance
Shares of COUP sought an initial valuation of $18; this was higher than the initial $14-$16 range. COUP quickly reached a high near $40 on its very first day of trading before settling at $25.30 on Friday.
We see the settling as a chance to obtain shares of COUP at a more reasonable price prior to the IPO quiet period expiration.
Business Overview: Coupa’s Value-as-a-Service Proposition
Coupa Software offers specialized cloud-based services that appeal to the business-to-business (B2B) sector. The company bills itself as a provider of Value-as-a-Service (VaaS), a clever play on the Software-as-a-Service (SAAS) cloud strategy forged by companies such as salesforce.com, inc. (NYSE:CRM).
In essence, the services provided by Coupa Software consist of a web-based platform that encompasses several business processes (purchasing, outsourcing, inventory, billing, invoicing, budgeting, and others). The services offered by Coupa Software are pre-integrated, which means that they could be very useful to startups and established companies alike. One of the attractive features of the platform is its B2B functionality, whereby an open network of vendors and suppliers are already connected and ready to do business.
Coupa Software Inc (NASDAQ:COUP) has proven to be a worthy competitor thus far. Although the company’s peer group does include heavyweights Oracle Corporation (NYSE:ORCL), Concur Technologies, Inc. (NASDAQ:CNQR) and SAP SE (ADR) (NYSE:SAP); in terms of companies similar in size and scope to Coupa (Paycom Software, Inc. (NYSE:PAYC) and Manhattan Associates, Inc. (NASDAQ:MANH), its revenue growth and relative valuation are attractive.
Financial Snapshot
Coupa highlights its rapid growth in recent quarters: year-over-year growth of 65% for the fiscal years ended January 31, 2015 and 2016 ($50.8 million and $83.7 million, respectively). Coupa did also post net losses of $27.3 million and $46.2 million, respectively, for the fiscal years ended January 31, 2015 and 2016.
Coupa also notes its increased spend under management in its SEC filings, describing that while this does not directly correlate to revenues and results of operations, it does illustrate the development of its core platform, which allows the company to attract and retain customers.
Conclusion: Strong Buying Opportunity
Coupa Software Inc (NASDAQ:COUP) shows strong supporters, such as Capital One, Rolls-Royce and Staples. Coupled with an impressive team of IPO underwriters, we are optimistic on the buying opportunity ahead of Coupa’s IPO quiet period expiration.
The IPO quiet period play has been the subject of academic articles and has been revisited by our own firm. In a sample spanning ~4 years, we found above-market returns for a statistically significant sample of companies, excluding REITs and banks, for a (-5, +2)-day holding period (Day 0 being event day).
This holds particularly true for tech firms like Coupa which have had a strong market debut.
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Disclosure: I am/we are long COUP.
Note: This article is written by Don Dion. Visit his site at DRD Investments for expert analysis on current and upcoming IPOs.