Question

Stock Market Valuation and Success - IPO

The business I’ve chosen is DocuSign Inc (DOCU). The company makes software for digitally signing documents, and has been on CNBC’s list of startups revolutionizing the technology industry three times. They went public in April 2018 after raising $629.3 million in IPO. The stock opened at $38 per share, above the estimates of between $24 and $26 per share, and closed at $39.73 per share. DocuSign planned to offer 16.1 million shares but initially sold 21.7 million shares giving them a total of 152.1 million shares, valuing the company at $4.41 billion, which is above the original $3 billion valuation estimated. The IPO money has been spent on major investments in infrastructure and security, and creating a company culture that’ll attract top talent (Novet, 2018).

The market at the time seemed very favorable for the tech company’s. DocuSign was the eighth cloud based company to go public in 2018 following Dropbox and Zscaler Inc. In recent years leading up to going public in 2018 the company struggled with revenue loss, but its revenue has risen 39% overall. The revenue losses have been $52 million for the fiscal year ending 2017, $115 million in 2016, and $123 million in 2015. In good news for shareholders the revenue in fiscal year 2019 was over $700 million and the company grew 35%. There was some fear the company may not be profitable in the future because most of their revenue is from customer subscriptions, but they’ve done a good job at partnering with companies to use their services creating more revenue, and more profit value for shareholders (Bary, 2018).

For Chegg: explain whether you agree or disagree with the above assessments of my Selected IPO that occurred in the last five years . Can you identify additional economic and market factors that may have influenced the results of the IPO?

Answer 1

The assessments prepared are logical and well formulated. However, there needs to be a clear explanation of the sector in which the company is operating - the sector, the exact type of service provided, previous problems faced in the absence of this technology, how this company provided a breakthrough in this sector, the growth prospects of the sector in general and the company in particular. Since the analysis is for the previous 5 years, the growth needs to be provided on a year-on- year basis and the balance sheet needs to be considered as well looking into the debt to equity ratio and the type of debts and loans it will need to repay in the near future.

The 2000s have led the people to believe that the Internet is the only viable business place of the future meaning that anything associated with the Internet or software has been approached or rated highly by the investors due to the apprehension of exponential growth.