The value of a U.S. software company partly owned by the Canada Pension Plan Investment Board has nearly doubled after an initial public offering on the New York Stock Exchange.
Shares of Informatica , a data management company based in Redwood City, Calif., began trading on the NYSE on Wednesday in a US$841-million IPO. The shares opened at $29. The company had marketed the shares at a price between US$29 and US$32.
Informatica shares closed at US$29 on Wednesday.
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At its initial price, Informatica has a total enterprise value of US$9.6-billion. The IPO is a return to the public markets, after CPPIB and U.S. private equity firm Permira took the company private in 2015 in a leveraged buyout that valued the company at US$5.3-billion. Combined, CPPIB and Permira control about 88.5 per cent of Informatica’s voting shares – an equal split of 44.25 per cent for each.
Geoff McKay, head of direct private equity in North America for CPPIB, said Informatica was “a bit of a sleeping giant” when CPPIB bought into the company in 2015.
“I think everyone … realizes the importance of quality of data,” he said. “We saw a real opportunity in a really exciting sector to grow a business that the world needs.”
Informatica has followed the path of many software firms, moving from a licence-based business model to a subscription software-as-a-service (SaaS) model. This model attracts investors because it offers stable, recurring revenue.
The company has seen steady revenue growth in recent years. Informatica’s annual recurring revenue was US$264-million at the end of June, a 39-per-cent increase from an ARR of US$189-million in June, 2020. It incurred a net loss of US$167.9-million on US$657-million in revenue in 2020, compared with a net loss of US$183.2-million on US$615-million in revenue in 2019.
The company, which had 5,700 customers at the end of June, spends heavily on sales and marketing to spur growth. Mr. McKay said the company spends significantly on research and development with an eye to being a leader in a market worth US$44-billion globally.
“That’s not always the most glamorous part of the business, R&D, but our customers love it,” Mr. McKay said.
He said CPPIB has not sold a share of the company as part of the IPO.
“We’re a pension plan that has very long-term horizons,” he said. “We look forward and say, ‘Is there more value to be generated here from a great team with great products?’ And we still feel that way.”
Informatica is one of CPPIB’s several direct investments in technology. The company is also invested in autonomous vehicle startup Waymo, electronics insurer Asurion and Sportradar, a company that collects and analyzes sports data.
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