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June 12, 2019, 11:53 a.m. EDT

CrowdStrike IPO: 5 things to know about the cybersecurity unicorn

Shares open at $63.50, or 87% above $34 IPO price

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By Wallace Witkowski, MarketWatch


Bloomberg News
George Kurtz, co-founder and CEO of Crowdstrike Inc., speaks in 2017.

CrowdStrike Holdings Inc. is set to be valued at nearly $7 billion, joining a surge of 2019 tech initial public offerings by companies that have commanded huge valuations from private investors but have largely lacked cybersecurity offerings.

The Sunnyvale, Calif.-based cybersecurity company late Tuesday priced its IPO at $34 a share, to raise more than $700 million. The price is far above the high end of its $28-to-$30 range that had already been raised from the original $19-to-$23 range.

CrowdStrike /zigman2/quotes/212513426/composite CRWD -2.00%  offered 18 million shares with underwriters receiving an option on an additional 2.7 million shares. Should those options get exercised, that would give CrowdStrike 199.4 million outstanding shares, which at $34 a share would give the company a valuation of $6.8 billion.

Goldman Sachs, J.P. Morgan, Bank of America Merrill Lynch and Barclays are listed among the underwriters.

The market valuation increased significantly Wednesday, as the stock rocketed at its open on the Nasdaq exchange. The first trade was at $63.50, or 87% above its IPO price, at 11:28 a.m. Eastern. It has since pared gains slightly to be up 76% in midday trading.

/zigman2/quotes/212513426/composite CRWD 54.88, -1.12, -2.00%

CrowdStrike will follow a spate of so-called unicorns joining the public markets from Silicon Valley this year, a Wall Street parade that has included Uber Technologies Inc. /zigman2/quotes/211348248/composite UBER +3.62%  , Lyft Inc. /zigman2/quotes/208999293/composite LYFT -0.45%  , Pinterest Inc. /zigman2/quotes/211319641/composite PINS -1.42%  and Zoom Video Communications Inc. /zigman2/quotes/211319643/composite ZM +1.94%  .

Cybersecurity offerings have slowed down this year, though. So far, only one other cybersecurity company has gone public in 2019, Tufin Software Technologies Ltd. /zigman2/quotes/210570935/composite TUFN +1.78% , and that was a small offering compared with the security IPOs of 2018. Last year, Carbon Black Inc.  went public around this time, with shares pricing at $19 apiece and surging 26% on their first day of trading. The stock price spent the past eight months below its IPO price, briefly breaking above $19 in mid-May, and was last down 5% at $15.68. Cybersecurity companies Zscaler Inc. /zigman2/quotes/203585803/composite ZS +0.82%  and Tenable Holdings Ltd. /zigman2/quotes/203199150/composite TENB +0.05%  also went public in 2018.

Over the past 12 months, the ETFMG Prime Cyber Security /zigman2/quotes/207892345/composite HACK 0.00%  has crept up 2.2%, only slightly better than the 1.1% gain by the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.51%  and the 2,1% gain by the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.38% .

Here are five things to know about CrowdStrike from its SEC filing.

A unicorn that was ready to go

Founded in 2011, CrowdStrike has raised $481 million to date, most recently with a $200 million round in June that gave the company a valuation of about $3 billion . Back in September, CrowdStrike Chief Executive George Kurtz had told MarketWatch that the company was at a size and scale that it could go public at any time.

Dual-class shares give VCs and CEO control

CrowdStrike will offer class A shares, which will have one vote each, while giving insiders class B shares, which will have 10 votes a share. As of Jan. 31, 458 stockholders own 178.7 million of the Class B shares outstanding.

The largest Class B holders are Warburg Pincus, with Joseph Landy on the board, owning 30.3% of the company ahead of the IPO; Accel, with Sameer Gandhi on the board, owning 20.3%; CapitalG, owning 11.2%; and CrowdStrike CEO Kurtz, owning 10.5%.

Losses remained steady as revenue nearly doubled

CrowdStrike reported a loss of $140 million on revenue of $249.8 million for the year ended Jan. 31, compared with a loss of $141.3 million on revenue of $118.6 million the previous year. That revenue jump was fueled by subscriptions, with CrowdStrike reporting subscription revenue of $219.4 million for the most recent year, compared with $92.6 million for the previous year, as the number of subscription customers doubled to 2,516 from 1,242.

Plenty of competition in a hot field

CrowdStrike prides its Falcon security platform as the “first multi-tenant, cloud native, intelligent security” Software-as-a-Service platform, but it deals in a crowded security marketplace.

According to CrowdStrike, competitors include McAfee Inc. and Symantec Corp. , which offer traditional antivirus protection; alternative endpoint security providers such as Carbon Black and privately held Cylance Inc.; and network security providers like Palo Alto Networks Inc. /zigman2/quotes/207599953/composite PANW -0.12%  and FireEye Inc. /zigman2/quotes/204730283/composite FEYE +0.71%  .

Sales and marketing expenses are considerable but falling vs. revenue

In the year ended Jan. 31, 2017, CrowdStrike reported sales and marketing costs of $53.7 million, more than the revenue of $52.7 million it took in for its 450 subscribers that year. Since then, sales and marketing costs ate up 88% of revenue the next year, and then 69% in the most recent year.

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US : U.S.: Nasdaq
$ 54.88
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Volume: 2.26M
Nov. 20, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$12.65 billion
Rev. per Employee
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/zigman2/quotes/211348248/composite
US : U.S.: NYSE
$ 28.03
+0.98 +3.62%
Volume: 52.78M
Nov. 20, 2019 4:10p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$46.14 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/208999293/composite
US : U.S.: Nasdaq
$ 43.95
-0.20 -0.45%
Volume: 7.55M
Nov. 20, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$13.14 billion
Rev. per Employee
$450,139
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/zigman2/quotes/211319641/composite
US : U.S.: NYSE
$ 19.40
-0.28 -1.42%
Volume: 6.04M
Nov. 20, 2019 4:10p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$10.99 billion
Rev. per Employee
N/A
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/zigman2/quotes/211319643/composite
US : U.S.: Nasdaq
$ 70.99
+1.35 +1.94%
Volume: 2.78M
Nov. 20, 2019 4:00p
P/E Ratio
1,749
Dividend Yield
N/A
Market Cap
$19.05 billion
Rev. per Employee
N/A
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/zigman2/quotes/210570935/composite
US : U.S.: NYSE
$ 17.12
+0.30 +1.78%
Volume: 218,840
Nov. 20, 2019 4:10p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$576.84 million
Rev. per Employee
N/A
loading...
/zigman2/quotes/203585803/composite
US : U.S.: Nasdaq
$ 46.60
+0.38 +0.82%
Volume: 2.55M
Nov. 20, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$5.89 billion
Rev. per Employee
$231,369
loading...
/zigman2/quotes/203199150/composite
US : U.S.: Nasdaq
$ 27.51
+0.02 +0.05%
Volume: 329,812
Nov. 20, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$2.70 billion
Rev. per Employee
$213,546
loading...
/zigman2/quotes/207892345/composite
US : U.S.: NYSE Arca
$ 41.65
0.00 0.00%
Volume: 136,892
Nov. 20, 2019 4:10p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,526.73
-43.93 -0.51%
Volume: 2.33M
Nov. 20, 2019 4:49p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,108.46
-11.72 -0.38%
Volume: 2.35B
Nov. 20, 2019 4:20p
loading...
/zigman2/quotes/207599953/composite
US : U.S.: NYSE
$ 247.87
-0.31 -0.12%
Volume: 1.20M
Nov. 20, 2019 4:10p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$24.07 billion
Rev. per Employee
$484,742
loading...
/zigman2/quotes/204730283/composite
US : U.S.: Nasdaq
$ 17.13
+0.12 +0.71%
Volume: 2.25M
Nov. 20, 2019 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$3.69 billion
Rev. per Employee
$259,672
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Wallace Witkowski is a MarketWatch news editor in San Francisco. Follow him on Twitter @wmwitkowski.

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