Special Reports

Pivotal IPO: Will it go, or will another company pull a Cisco?

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Pivotal Software, Inc. filed a prospectus on March 23 with the U.S. Securities and Exchange Commission (SEC) for a potential initial public offering (IPO). This comes on the heels of rumors that Dell Technologies was exploring a reverse merger with its majority-owned, publicly traded VMware subsidiary. Backed by Silver Lake Partners, LLC, Dell’s efforts to meet its debt obligations from the EMC acquisition, from which it formed Dell Technologies, are widely believed to be at the root of the VMware speculation.

So, what is Pivotal worth? In prior years, IPOs of more traditional technology and software companies have been valued at around five times their annual revenue. However, in recent years as more cloud-native companies with subscription-based business models go public, this multiple shifts upward. For example, AppDynamics, though it did not go public, was valued at $1.9 billion with annual revenues of approximately $220 million, or a valuation of nearly 10 times. A few days prior to AppDynamics’ planned IPO, Cisco bought the company for $3.7 billion, suggesting Pivotal’s final price could be considerably higher than the five-times multiple the industry has historically known.

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