GitLab makes its debut on Nasdaq after IPO pricing is higher than expected

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GitLab’s stock price rose 22% in the first day of trading on Thursday, after the developer collaboration software vendor sold shares in its IPO well above the expected range.

Under the NASDAQ trading symbol “GTLB”, GitLab priced its stock at $77 late on Wednesday, valuing the company at approximately $11 billion. GitLab has stated that it may sell shares for between $66 and $69 per share.The stock opened at US$94.25, pushing the market value of GitLab to US$13.5 billion

Since its establishment nearly a decade ago, GitLab has been catching up with GitHub in the source code repository market, which also includes Atlassian’s Bitbucket. Microsoft acquired GitHub for $7.5 billion in 2018. Since then, GitLab has rapidly grown into the only large independent player in the market.

Revenue in the second quarter increased 69% year-on-year to US$58.1 million. However, since GitLab spends three-quarters of its revenue on sales and marketing, mainly to build its developer user base, the company recorded a net loss of US$40.2 million in the most recent quarter.

On October 14, 2021, people celebrated Gitlab’s initial public offering on Nasdaq.

Source: Nasdaq

GitLab raised nearly US$650 million in this offering, and investors purchased more than US$150 million in additional stock from entities associated with GitLab CEO Sid Sijbrandij.

GitLab provides a free version of what the company calls the DevOps platform, which refers to the combination of developers and IT operations. The software allows users to process code, package, release, and monitor code. Customers can run GitLab in any public cloud, in their own data center, or as a service hosted by GitLab.

The company makes money from its quality products. At $19 per user per month, GitLab includes tools for enterprises and faster code reviews, and users can get features such as security and compliance for only $99 per month. GitLab stated in its prospectus that approximately 383 customers spend at least $100,000 per year.

“Our future success depends in part on our ability to convert users of free products into paying customers by selling additional products and upselling additional subscription services,” GitLab said.

GitLab stated that its net revenue retention rate is a key indicator for subscription software companies because it shows the success of its customers, which climbed to 152% during July. This will make it one of the top listed software companies.

With the growth of GitLab, this is also the main reason why the company has achieved such a high income multiple. With a market value of $13.5 billion, GitLab’s annualized revenue is about 58 times, only lower than four of the 58 companies in the Bessemer Cloud Index and higher than Atlassian.

GitLab is widely regarded as the pioneer of remote work. Although the company was forced to adapt to distributed work during the pandemic, GitLab started this way and did not need to make any changes to its 1,350 employees operating in more than 65 countries. In the title of its prospectus, Gitlab said “Addresses are not applicable”.

GitLab was established in 2012 and was registered two years later. The last secondary financing of US$6 billion was confirmed in early 2021. This financing allows existing shareholders to sell up to 20% of their acquired equity. This is higher than the valuation of USD 2.7 billion in the round of financing at the end of 2019.

In the “Team Manual” on its website, GitLab has publicly stated that it plans to go public in November 2020. After the pandemic swept the entire economy at the beginning of last year, the company cancelled the time for its debut and said that it is still on the roadmap to go public.

According to the prospectus, GitLab co-founder Sijbrandij is the company’s largest shareholder, with 19% ownership before the issuance. Khosla Ventures owns 14%, followed by ICONIQ with about 12%, August Capital with 11%, and GV (formerly Google Ventures) slightly less than 7%.

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