Cloud business software provider ServiceTitan has announced a price range of $52 to $57 per share for its initial public stock offering (IPO), aiming to raise between $446.2 million and $514.2 million at the midrange.

Key Details of the IPO

  • Price Range: $52 to $57 per share
  • Target Fundraising: $446.2 million to $514.2 million
  • Use of Funds: The company plans to use a significant portion of the funds, approximately $311 million, to buy back all shares of its nonconvertible preferred stock at $1,000 per share

Preferred Stock Deal

The company’s preferred stock deal with Saturn FD Holdings, LP, and Coatue Tactical Solutions PS involves an annual 10% dividend for five years and 15% for the sixth year. The average dividend yield for public companies in tech is 3.2%, as reported by Dividend.com.

Investors

ICONIQ Growth, Bessemer Venture Partners, and Battery Ventures are among the largest venture capital investors in ServiceTitan. An entity of TPG is also a significant investor, according to the documents.

Unconventional Use of IPO Funds

Unlike most companies, which typically use their IPO funds for business expansion or acquisitions, ServiceTitan plans to dedicate any remaining funds to working capital for the company or other corporate uses.

Series H Round and Compounding IPO Ratchet Structure

The company previously raised a Series H round in 2022, agreeing to grant investors a compounding IPO ratchet structure. This means that if the IPO share price is lower than what the Series H investors paid ($84.57 per share), ServiceTitan will have to grant them additional shares as part of the IPO.

VC Analysis

Alex Clayton, general partner at Meritech Capital and known for his IPO analysis, commented on the situation: "They clearly want to have a cleaner cap table so are using the proceeds to buy these back. They could buy this back anytime and now have the cash to do so."

Clayton also believes that the bankers are playing their typical IPO pricing games with the $52 to $57 range, which might result in the company pricing above the range.

Direct Share Program

ServiceTitan is setting aside 5% of its shares for a direct share program, allowing friends and family of the founders, as well as certain C-suite decision-makers of its customers, to buy stock.

IPO Timing and Tech Industry Trends

The IPO market has been active in recent times, with various companies going public. The tech industry continues to evolve, with advancements in areas like AI and space exploration.

Conclusion

ServiceTitan’s IPO plans and unconventional use of funds have garnered attention from investors and analysts alike. As the company moves forward, it will be interesting to see how its leadership navigates the complexities of the public market.

Sources

  • ServiceTitan press release
  • Dividend.com
  • Meritech Capital blog

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