Monday.com, which operates an enterprise development platform, plans to launch its IPO this week. The deal is likely to get lots of attention from Wall Street. The company expects to raise nearly $500 million at a price range of $125 to $140, putting the market capitalization at $6.8 billion. For the offering, Salesforce Venture and Zoom Technologies (ZM) have agreed to purchase $150 million in Monday.com shares via a private placement. (See IPO Calendar on TipRanks)
The IPO is slated for Thursday and the shares will be listed on the NASDAQ. The lead underwriters include Goldman Sachs (GS), J.P. Morgan (JPM), Allen & Company, and Jefferies (JEF).
The origins of Monday.com go back to 2010. The software was initially an internal development tool for Wix.com (WIX), which is based in Israel. A couple of years later, Monday.com was spun-off and had a capital raise of $1.5 million.
Since then, the company has been highly efficient with its capital. It has used only about $121 million from its rounds of investments. Note that the company has been able to generate $2 of ARR (Annual Recurring Revenue) for every $1 of capital used.
Backgrounder on the Company
Custom application development is complex and costly for companies. It is not uncommon for projects to fail to produce the expected results. Challenges include finding technical talent, integrating with legacy systems and being agile with development, among many others.
To help address this, a new type of technology has emerged, called low-code or no-code. Monday.com is one of the pioneers of this technology.
Low-code or no-code allows for programming by using drag-and-drop and simple commands. In other words, a person does not need to be technical to build applications. Instead, this type of programming requires skill in setting up workflows and testing.
The result is that Monday.com is essentially a cross between custom programming and off-the-shelf software. Using Monday.com's technology, a company can get strong ROI (Return On Investment) more quickly and with less risk.
The Work OS is at the core of Monday’s technology. It has a myriad of different components and integrations, as well as a built-in database and dynamic widgets to create interactive dashboards.
Growth at Monday.com has been impressive. From 2019 to 2020, the revenues shot up from $78.1 million to $161.1 million. As for the first quarter, the revenues went up from $31.9 million to $59 million year-over-year.
The company boasts 127,974 customers that span more than 200 industries and 190 countries. It is also gaining traction with enterprise customers (those that generate ARR of more than $50,000), which have increased in number from 76 to 264 over the past year.
At the same time, Monday.com has been posting substantial net losses, as is the case with many early-stage tech companies. For 2020, net losses came to $152.2 million.
Bottom Line on the Monday.com IPO
Monday.com is certainly benefiting from some major trends. For example, according to research from IDC (International Data Corporation), about 65% of the global GDP (Gross Domestic Product) is estimated to be digitized from 2020 to 2023. That means most products and services will be based on a digital delivery model or require digital augmentation. Consequently, companies are expected to spending around $6.8 billion on new technologies.
Monday.com's addressable market is at over $56 billion, and is expected to hit $87.6 billion by 2024.
This does not necessarily mean that investors should rush to buy the IPO. As we’ve seen with other stocks this year, there may be an initial pop but the gains can quickly fade away. Thus, by waiting patiently before investing, investors may ultimately get a better value on this offering.
Disclosure: Tom Taulli does not have a position in Monday.com stock.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.