The first initial public offering of a tech unicorn in 2018, Zscaler (ZS), is set to begin trading Friday with two more unicorns galloping to the gate and adding some much-needed excitement to a ho-hum IPO market.
Investor interest in Zscaler is high. On Tuesday, Zscaler hiked the estimated price of shares to a range of 13 to 15 a share, up from 10 to 12. It also increased the amount of shares being offered to 12 million, up from 10 million, suggesting it will raise about $154 million. It plans to list on the Nasdaq under the symbol ZS.
The next tech unicorn after Zscaler will be file-storage company Dropbox (DBX), which comes next week and is expected to trade on the Nasdaq under the ticker DBX. It will be followed by streaming music company Spotify, expected to trade on the New York Stock Exchange under the ticker SPOT.
In the IPO prospectus, Zscaler says it’s a leader and pioneering developer of cloud-based network security for businesses, with 2,800 customers.
The market for cloud computing services has advanced rapidly since Amazon (AMZN) introduced its highly successful Amazon Web Services cloud computing program, a rival to Microsoft (MSFT) and its Azure platform. The growing use of cloud services from Amazon, Microsoft and others has significantly increased cybersecurity business risks, which Zscaler aims to solve.
Founded in 2017, Zscaler reported revenue of $125.7 million in 2017, up 57% from the prior year, and a net loss of $45 million. IPO research and advisory firm IPOboutique.com said underwriter guidance from channel checks reveals that the demand for Zscaler shares is strong, saying it’s “many multiple times oversubscribed.”
Zscaler has a market valuation of about $1.64 billion. The unicorn designation applies to companies that, before their IPO, had a private market valuation above $1 billion.
IBD’S TAKE: The biggest stock market winners typically make their major price moves within a few months or years of their initial public offering. So it pays to identify and track companies that are getting ready to go or have recently gone public. Learn more at IBD’s IPO page. IBD also focuses on the best-performing IPOs of the past three years in its IPO Leaders column.
Tech unicorn Dropbox moved closer to launching an IPO as the provider of data management services outlined the terms of its deal on Monday.
Dropbox plans to raise $612 million by offering 36 million shares at a price range of 16 to 18, according to its IPO prospectus filed with the Securities and Exchange Commission. Dropbox is expected to begin trading on Thursday, March 22. The IPO values Dropbox at about $7.4 billion.
Competitors to Dropbox in the content collaboration space include Amazon and Microsoft. Amazon shares were up 0.5%, near 1,595, during afternoon trading on the stock market today. Microsoft shares were down 0.3%, near 94.10.
Another closely watched tech unicorn IPO coming up is streaming music giant Spotify, which filed for an initial public offering that seeks to raise $1 billion.
Spotify, with a market valuation near $19 billion, says it’s the largest music-streaming service provider. A trading date has not been set.
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