Informatica IPO dead on the money as shares close at offer price

By Robert Scammell

Shares in enterprise data management firm Informatica closed at $29 on the first day of its stock market return with a $7.4bn valuation.

Informatica shares slumped by nearly 5% when markets opened on Wednesday to $27.55. They reached a high of $30.28 before returning to the $29 price at which it sold 29 million shares at during its IPO. The company raised $841m in the process, which it said it would use to pay off some of its debt.

Informatica CEO Amit Walia is probably happy. Speaking to Verdict ahead of the IPO, Walia said he was not worried about where the share price would close on opening day, and that he had no “valuation in mind to give me joy or give me despair.”

Informatica’s total enterprise value is $9.6bn when including its $2.4bn debt load.

The Redwood City, California-headquartered company listed on the New York Stock Exchange six years after it was taken private in a leveraged buyout that valued it at $5.3bn.

Since then, the company has embarked on an overhaul of its business model in which it moved from a license-based business model to subscriptions. Informatica develops software for enterprises to manage their data in the cloud, including data masking, data visualisation and data replica tools.

It spent $1bn in R&D over the past five years to build its flagship Intelligence Data Management Cloud (IDCM) platform.

Informatica share price suggests maximum value

Informatica chose to price its shares at the bottom end of the $29-$32 range. Based on the first day of trading it suggests the company priced its shares accurately.

Had the shares soared on opening day it would have meant Informatica missed an opportunity to price them higher during the IPO and so generate more cash.

However, when a company underprices its shares during an IPO the opening day surge provides instant returns to investors. That in turn can encourage the further buying of more stock among investors.

Or as the IPOhub put it: “Ironically, even though news outlets often hail IPOs with high ‘pops’ as successful, first day jumps in stock price also represent lost capital for the company. For example, when LinkedIn went public in 2011, it experienced a first-day pop of 109%. However, if LinkedIn’s shares had not been underpriced, it could have raised an additional $380 million.”

The modest start to Informatica’s second stint as a public company could also indicate a declining appetite for IPOs in the second half of 2021.

In recent years hyped technology companies such as Uber and Deliveroo saw their shares slump during their opening days in a sign that the market deemed them to be overvalued. That has seen companies opt for more cautious pricing to avoid large opening day falls.

In his interview with Verdict, Walia said he was not “wedded to a valuation number” and that he was not worried about where the share price would close upon opening.

“Markets move up and markets move down,” the CEO said, playing down the opening day pressures. “As long as your core business is fundamentally doing well in the long term you always come out better.”

He added: “I don’t have a valuation in mind to give me joy or give me despair.”

Informatica’s customers span sectors including pharmaceutical, retail, defence and transport and it counts the likes of Unilever, Kroger, Sanofi and the US Air Force among its client base.

According to GlobalData’s thematic analysts, Informatica’s top competitors include Dataiku, Qlik and Delphix.