SAN JOSE — Cloud computing company Nutanix shattered expectations on its first day of trading Friday, soaring to nearly one and a half times its IPO price and sending a strong signal that the market is ready and waiting for more tech offerings.
Nutanix saw a staggering day-one pop of 131 percent — the largest bump of 2016 and one expected to quell the fears of tech companies that have put off initial public offerings. It ended the day with a market cap of about $5 billion.
“If people don’t get excited about this, then I’d be very surprised,” said Chris Taylor, executive vice president of global research and thought leadership for analytics company Ipreo. “I’m sure a lot of phones are ringing today.”
The San Jose-based company kicked off the day trading at $26.50 on Friday and jumped to $39.40 in the afternoon before closing at $37. The first-day surge came even after Nutanix, which sells data-storage solutions to companies, twice upped the price of its offering.
Nutanix raised $238 million Thursday evening after pricing its shares at $16, making its IPO the largest venture-backed offering of the year, according to Renaissance Capital, which manages IPO-focused exchange-traded funds.
The impressive showing pumped life into what has been an otherwise slow year for IPOs, especially for the Silicon Valley tech industry, which didn’t see its first IPO until June. Throughout the U.S., there have been just 63 public debuts so far this year, compared with 123 at this time in 2015, according to Ipreo data.
While Nutanix’s strong showing signals that investors have an appetite for tech offerings, it doesn’t necessarily mean companies will start lining up. Many tech startups still can rake in venture capital dollars at enormous private valuations, giving them little motivation to invite the scrutiny and the risks that come with going public.
“It’s not a demand issue,” Taylor said of the recent IPO shortage. “It’s a supply issue.”
Nutanix, which is trading on the Nasdaq Global Select Market under the symbol NTNX, was last valued at $2 billion as a private startup.
In mid-September, Nutanix planned to go public at a discount from its private valuation, announcing a proposed price range of $11-$13 a share that would have given the company a market cap of $1.8 billion. But the company upped its proposed range to $13-$15, and then ended up pricing its shares even higher — at $16.
The company’s debut stands out among a handful of successful Silicon Valley tech IPOs this year. It beat San Francisco-based cloud communications startup Twilio, which popped 92 percent on its first day of trading in June. Just over a month later, Redwood City-based data-software company Talend saw shares jump 42 percent in its public market debut.
Nutanix sells a product that combines servers, storage and networking — components that companies previously had to buy in three different places. By combining that technology, Nutanix intends to offer a cheaper, more convenient and more flexible data-storage solution. Companies using Nutanix technology can add storage capacity at will as their needs grow, and they can house data both in the cloud and at their own sites.
Early Nutanix investor David Blumberg of Blumberg Capital said that innovative approach to building a data center is what sets the 7-year-old company apart from competitors such as Mountain View-based Pure Storage, which disappointed with a lackluster IPO last year. Blumberg also cited Nutanix’s sound business plan.
Though Nutanix isn’t profitable, its growth impressed industry analysts. The company’s revenue ballooned from $127 million in the 2014 fiscal year to $445 million in the fiscal year that ended in July, according to a filing with the Securities and Exchange Commission.
“People find it compelling,” Blumberg said of Nutanix’s story. “And there aren’t a lot of holes.”
