Last week we saw the public debuts of (results), (results), and (results). If you hoped for an IPO after all of that action, we’re sorry. There’s another IPO this week, and one the week after if the current calendar holds.

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So, in honor of keeping you informed, here’s what you need to know this week regarding the impending public offerings from and .

Livongo

We covered Livongo when it first filed to go public, noting its rapid revenue growth (the company employs a SaaS model to sell its healtech products) and expanding losses. Those results were accompanied by rising cash burn from the firm’s operations.

In a way, Livongo’s rapid revenue expansion and expanding costs relating to growth make it a fun candidate for a public offering; the company needs the cash that it is going to raise in its public debut.

Now, to the news. This morning Livongo with the SEC noting that it intends to sell 10.7 million shares in its public offering at a price of $24 to $26 per share. At midpoint pricing, that works out to a $267.5 million raise, a raft of capital for a firm with $55 million at the end of its most recent reporting period.

Livongo is worth about $2.2 billion at the midpoint of its new range, not counting extra shares made available to its underwriting banks.

The price range from a prior estimate of $20 to $23 per share, meaning that Livongo is seeing market demand that it finds encouraging. Livongo is to price Thursday, and trade Friday.

Livongo, a California-based company, raised while a private company according to SA国际传媒 data, including capital from and .

Dynatrace

We first sunk our teeth into the Dynatrace offering in early July. At that time, we discovered that the software company was in the process of moving from a license-based company to a SaaS-modeled firm. It can take time to make the switch, as companies swap out old revenue for new, subscription-based top line while trying to grow in aggregate at the same time.

The numbers that Dynatrace is putting up are a lesson by themselves, but what we care more about is the news. And in this case, we have a price range. Dynatrace is an $11 to $13 price range in its IPO. Given that the company is selling 34 million shares itself (extant shareholders are selling stock as well, and there are a few more million more shares set aside for underwriting entities), it could raise up to $442 million in the transaction.

And, at the midpoint of its range, could be worth around $3.47 billion, not counting shares set aside for underwriting entities should they choose to purchase them.

So, this is an even larger offering for a more valuable company than the Livongo deal, but in the case of Dynatrace, we aren’t sure yet when it will price and trade.

Dynatrace, based in Massachusetts, didn’t raise much before . The firm’s only three known funding rounds . The firm raised from and .

And that’s that! You’re all set until later in the week when we’ll watch Livongo go live.

Illustration: .

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When decided to go public not with a traditional IPO but with a direct listing, there were two main viewpoints that I saw. The first was laudatory. Good on Slack, the thinking went, for sticking it to the bankers and going public its own way.

The second, and this is where I mostly found my own thoughts, was less positive. Forget the fees, this perspective ran, why not raise more money when you can at a price that you like, bolstering the corporate balance sheet in the process? Hell, you could just make more acquisitions with the extra lucre.

That Slack had 补迟听lower prices while private that it did not need (Evidence: The hundreds of millions of dollars it was sitting on when it decided to go public.), why not raise during its public debut?

All that pre-talk is now ancient chatter. Slack did pursue a direct listing, it is now public, and we can take a look at where the company currently trades. So, here are the data points as I understand them:

• Slack’s : $11.91
• Slack’s direct listing reference price: $26
• Slack’s post-listing share price range: $34.81-$42.00

Slack is worth $36.62 as I write to you this morning. That’s perfectly fine given its range, sitting comfortably above its reference price, and miles above its final per-share price set while private (Note: There could be more going on there than just a sticker price, so don’t put infinite stock in the private price against the public price.) That’s what Slack wanted.

So, points to the company and its leadership for doing things their own way. It worked.

Lessons

Slack’s direct listing success does not mean that most companies going public should, let alone can, pursue a similar debut.

Indeed, most companies probably cannot and won’t want to. Let’s explain. They will not be able to as a direct listing requires a higher level of market awareness than most companies can muster. And, most companies won’t want to go public via a direct listing given that it is not a fundraising mechanism.

As we saw with Livongo recently, going public is still, for lots of firms, a way to put extra cash on the balance sheet to allow for more growth. Slack was stuffed to the gills with cash given to it by investors hungry for a quick double or triple or quadruple on a company that was hot even by Silicon Valley standards.

So Slack had huge mind share, rising market prominence, and towering bank accounts. That, in this case, led to a pretty great result for Slack; it got what it wanted without the pricing dance and inevitable media cycle around its pricing.

At the same time, let’s not expect the exception to the rule to become the expected path for all future companies.

One last thing. There seems to be among investors as many companies see their traditionally-priced IPO shares shoot higher in early trading. The general argument is that lots of money was missed. I can鈥檛 quite dissect what percent of that argument is correct censure of banks for mispricing IPOs, and what portion is more the market’s over-exuberance in the face of new offerings.

That could lead more companies to try something non-traditional than otherwise might have considered the option. We’ll see.

Illustration: .

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Livongo, founded in 2014 and based in Mountain View, during its life as a private company. Most recently, the firm led by and . Notably, both General Catalyst and Kinnevik co-led the firm’s , and the former firm led its . General Catalyst owns around a quarter of the company according to its S-1 filing.

Livongo claims to want to “empower people with chronic conditions to live better and healthier lives.” As far as corporate goals go, that’s not a bad approach to making money. Its model works by providing data collection tools (blood sugar testing devices for people with diabetes, for example) to users, coupled to a platform that tracks their personal data (and its progress or regression) and provides support.

Bringing actionable data and support to chronic illness sufferers is a good idea. Livongo has expanded from the diabetes market to other chronic conditions including hypertension and “prediabetes.” The company is also bringing its tech to bear on weight control, among other health issues.

As you can imagine, Livongo sells to large companies who roll its service out to 679 “clients” and 164,000 “members,” according to the company. In the first quarter of 2019, the company claims it added 50,000 of its members. That’s a lot for a single, three-month period given its preceding customer base.

How did that accretion of new users translate to growth in dollar terms? Let’s explore.

The Numbers

As an initial point of reference, Livongo sells its services to customers on a recurring, often multi-year contract basis. As such, we’re dealing with a SaaS-styled company, even though it deals with health issues and not, say, enterprise software.

To understand the company’s growth, let’s compare two time periods: its most recent set of full-year results, and its most-recent quarterly performance.

In yearly terms, Livongo grew from $30.9 million in revenue in 2017 to $68.4 million in 2018. That pace of growth, clocking in at over 100 percent, is the sort of expansion that investors (private and public alike) love to see. Its losses tracked higher at roughly the same percentage growth rate, rising from $16.9 million on a net basis to $33.4 million in the next year.

The company’s more recent performance is similarly sharp. In the first three months of 2018, Livongo posted revenue of $12.5 million, leading to a $4.2 million net loss. In the first three months of 2019, in contrast, Livongo generated revenue of $32.1 million, prompting a $15.0 million net loss. Again, each figure rising quickly as the firm ramps its sales and marketing, and general and administrative spending as its top line explodes.

Inside the headline numbers, the cost of Livongo’s growth is clearer. Observe the following chart tracking its cash consumption:

Translating, the company burned nearly as much cash across its operating and investing activities in the first quarter of 2019 than it did in all of 2018. So, Livongo is growing quickly, but at high expense. Investors likely won’t care given that its losses are merely tracking its revenue north as a manageable percentage, but the company’s cash position of $55.0 million at the end of Q1 2019 implies that it is going public now to raise capital to pay its bills.

Raising money in an IPO needed for operations is no sin, even if it feels retro in the era of Slack’s direct listing. But, Livongo is a company with a working model and a growth that many companies would kill for. All that’s left here is to figure out what the firm is worth, and get it out the door.

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