UiPath IPO Range Increased, Valuation Still Below Private Round

UiPath's Impending IPO and Valuation Analysis

UiPath, a leading company in the field of robotic process automation, is preparing to launch its initial public offering (IPO) this week, prompting a detailed examination of its current worth.

Recent Private Valuation

The company achieved a substantial valuation of $35 billion in February during a $750 million funding round on private markets. However, replicating this valuation in the public market, particularly concerning the IPO price, is presenting certain difficulties.

This isn't entirely unexpected, considering the IPO market experienced a slowdown towards the end of the first quarter of 2021. UiPath secured its last private investment when investor appetite for new public offerings was at its peak, and is now entering the market under somewhat different conditions.

Adjustments to the IPO Range

UiPath has revised its IPO price range upward, initially set between $43 and $50 per share, to a new range of $52 to $54 per share. This represents a 21% increase at the lower end of the range and an 8% increase at the upper end.

Furthermore, the company is offering a greater number of shares for sale, which is anticipated to result in a slightly higher overall valuation, even considering the 8% gain. A further breakdown of the financial implications will follow.

Valuation Comparison and Profitability

Let's revisit the calculations to clarify the new, fully diluted IPO valuations. Subsequently, we will compare these figures to the company’s last private valuation. We will also assess whether our previous observations regarding the company’s recent profitability have proven accurate.

Finally, we will speculate on the potential final pricing of the IPO, and whether it is likely to exceed the newly established price range.

Key Considerations

• Robotic Process Automation (RPA): UiPath is a prominent player in this rapidly growing technology sector.
• IPO Market Conditions: The timing of the IPO is crucial, given the recent cooling of the market.
• Valuation Metrics: Comparing private and public valuations provides insight into investor sentiment.

UiPath's IPO at $54: A Detailed Analysis

UiPath plans to offer 9,416,384 shares in its initial public offering (IPO), an increase from the previously filed 6,807,688 shares. Existing shareholders are also expected to sell 14,474,393 shares, consistent with prior disclosures.

The underwriters' over-allotment option, often referred to as a greenshoe option, has been modestly expanded to 3,583,616 shares. Consequently, a total of 27,474,393 shares of UiPath Class A stock could be sold through the IPO if the underwriters fully exercise their option.

This potential sale translates to a maximum gross proceeds of $1.48 billion from its market debut, marking a substantial IPO. Following the offering, the total number of UiPath Class A and Class B shares outstanding will reach 519,153,731.

This share count results in a valuation for the former startup ranging from $26.99 billion to $28.03 billion. However, a comprehensive assessment of UiPath’s IPO valuation requires considering fully diluted shares.

When accounting for all equity potentially issuable through outstanding stock options and restricted stock units (RSUs) as of January 31, 2021, the total share count increases to 558,812,722. At the higher end of the revised IPO price range, this could value the company at approximately $30.17 billion.

Despite this valuation, UiPath is still projected to experience a price adjustment as part of its IPO. The increased price range and expanded share sale will undoubtedly bolster UiPath’s IPO valuation and strengthen its financial position.

However, a significant disparity remains between the company’s final private valuation and its anticipated public debut price. This gap may serve as a cautionary signal to investors who are aggressively valuing late-stage, pre-IPO unicorns with the expectation of a rapid return.

Recent data included in UiPath’s S-1/A filing, showcasing improved profitability and growth in the fourth quarter of 2020, appears to have positively influenced its valuation. The company’s inclusion of quarterly data was a recent addition to its IPO filing.

The situation remains fluid, and a pricing above the current range could narrow the gap between UiPath’s IPO and final private valuations. However, achieving such an aggressive pricing seems unlikely at this time.

The current circumstances raise the question of whether this trend, similar to what occurred with Roblox, is specific to UiPath or reflects a broader caution within the IPO market. Skepticism regarding the long-term prospects of Robotic Process Automation (RPA) is a valid viewpoint.

Conversely, the somewhat underwhelming debuts of companies like Compass and AppLovin suggest a growing sense of caution in IPO markets. Despite the potential for a down IPO, UiPath’s value has nearly tripled since last July, when it was valued at $10.2 billion.

This substantial growth makes it difficult to criticize the company’s current position. Further updates will be provided once the final pricing is determined.