Shares of marketing automation firm Klaviyo surged by almost 23% in their debut trading session on the New York Stock Exchange (NYSE) on Wednesday, before declining throughout the day to post a 9.2% total gain. Klaviyo stock began trading at $36.75 under the ticker KVYO and declined throughout the day to close at $32.76.
On Tuesday, ahead of the Klaviyo IPO, the firm set the price for its 19.2 million shares at $30 each, which assessed its value at slightly above $9 billion on a fully diluted basis. Among these shares, the company itself sold 11.5 million, adding $345 million in cash to its balance sheet. Klaviyo was previously valued at $9.5 billion in a private financing round in 2021.
BlackRock (BLK) and AllianceBernstein have agreed to buy up to $100 million worth of Klaviyo shares each, accounting for a large portion of the total IPO proceeds.
"Every consumer business is building more and smarter digital relationships with their customers. This is a very durable trend. We're just at the start of that," Andrew Bialecki, Klaviyo’s co-founder and CEO, commented on Wednesday. "Being a public company shows that you're in it for the long haul."
The Klaviyo IPO will be looking to crack open a market for tech offerings that has been effectively frozen for close to two years. While both SoftBank-backed chip designer Arm and San Francisco-based grocery delivery firm Instacart saw robust debuts in recent days, both firms’ shares retraced a significant portion of their initial gains after first-day surges. However, it's worth noting that their shares are still trading above their respective IPO prices.
Established in 2012 by software engineers Andrew Bialecki and Ed Hallen, Klaviyo specializes in data management and analysis for e-commerce brands, helping deliver personalized marketing emails and messages to prospective customers.
In the 2022 calendar year, the company earned $472 million in revenue, reflecting a robust 63% growth compared to the previous year, as noted by Morningstar.
While Klaviyo reported a net loss of $49 million for the full year, it managed to generate a profit of $15 million on $320 million in revenue during the six months ending in June. This profitability may hold significant value in an evolving IPO landscape characterized by increasing borrowing costs and tightening credit.
“With capital markets closed for nearly two years, unprofitable companies have been forced to fund operations by spending cash balances,” Goldman Sachs analysts led by David Kostin wrote in a note to clients on Monday. “This experience has driven investors to prefer stocks with high levels of current profitability.”
Naturally, profitability is never guaranteed — in its filing with the Securities and Exchange Commission, Klaviyo cautioned that the rapid revenue growth it has seen may not be sustainable as its business matures. The company also emphasized that it is “not certain” whether it will continue to be profitable.
One of Klaviyo's primary supporters and significant sources of business is Shopify (SHOP). The e-commerce software provider holds approximately 11% of Klaviyo shares and made a $100 million investment in the company last year year. Klaviyo reported that by the end of 2022, roughly 78% of its annualized recurring revenue (ARR) — representing the value of its existing paid subscriptions — came from customers who are also Shopify users.
“We love working with the market-leading platforms,” said Klaviyo CEO Andrew Bialecki in an interview with CNBC on Wednesday. “When we decided in the early days we were going to focus on retail businesses, consumer businesses first, we said who are the best platforms out there, the most innovative. Obviously Shopify was at the top of that list.”
Analysts were largely optimistic about the company and its prospects heading into the Klaviyo IPO, although it remains to be seen how the firm’s stock will perform on the open market.
“Klaviyo is a best-in-class marketing tech company with incredible revenue growth,” according to James Ulan, the lead analyst for emerging technology at PitchBook. He believes that the company boasts robust financials when compared to its software-as-a-service competitors, such as Braze.
“Klaviyo is among the first tranche of VC-backed tech companies to test the IPO market and could be the beginning of a larger number of lesser-known names to justify their place in public markets,” Derek Hernandez, a senior analyst for PitchBook who covers emerging tech, told Fast Company in an emailed comment. “Thus far a conservative approach to valuation has been pretty consistently successful, especially for better-known names such as Arm and Instacart.”
In comments cited by Investing.com, analysts at investment research firm Third Bridge wrote that Klaviyo’s short-term growth “could exceed 57% given this was achieved during an ecommerce dip, but long-term they will need increased traction on other ecommerce platforms as they reach saturation with Shopify users.”
“Klaviyo’s massive return-on-investment is unrivaled by any competitor or set of vendors,” they said.
Analysts are yet to issue price targets for Klaviyo shares following the company’s NYSE debut.
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