Sasan Goodarzi, president and chief executive officer of Intuit Inc., Feb. 25, 2020.
David Paul Morris | Bloomberg | Getty Images
BigCommerce’s stock more than tripled in its market debut last week, marking the biggest IPO pop of 2020 and valuing the software company at close to $5 billion. The rally justified the company’s decision to stay independent.
Just about a month before the IPO, Intuit offered to buy BigCommerce for $1.5 billion, according to people familiar with the matter, who asked not to be named because the talks were confidential. Some BigCommerce leaders wanted to take the deal.
BigCommerce CEO Brent Bellm gambled that, even in the midst of a global pandemic and economic slump, public investors would continue piling into new cloud software stocks. Several subscription software vendors have doubled or even tripled in value this year, benefiting from surging demand for tools that help companies run digital businesses and manage remote workforces.
A BigCommerce spokesperson declined to comment. Intuit didn’t provide a comment.
BigCommerce’s biggest rival, Shopify, has been a Wall Street darling for four years, a stretch during which the stock price has multiplied by over 25-fold and its market cap has jumped to about $120 billion. Both companies provide e-retailers with software for developing their websites, handling payments and dealing with currency conversions. While Shopify is more than 20 times bigger than BigCommerce and still growing much faster, the market appears plenty big for another multibillion-dollar company, particularly as the pandemic pushes more retail online.
Shopify four-year rally
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“We believe we are well-positioned to continue to benefit from the macro-economic shift to ecommerce that Covid-19 has accelerated, but revenue may be more variable in the near-term as a result,” BigCommerce said in its IPO prospectus.
Companies commonly file to go public and then field acquisition offers from potential buyers, knowing the clock is ticking to a likely pop. AppDynamics was on the eve of its IPO in 2017, when Cisco jumped in with a $3.7 billion offer. SAP purchased Qualtrics for $8 billion in 2018, just before a planned market debut.
But cloud software stocks are getting such favorable multiples now that SAP is spinning Qualtrics out through an IPO, two years after the acquisition. Datadog reportedly received a $7 billion takeover offer before its IPO last year, and is now valued at almost $23 billion.
High multiples
Were BigCommerce to have taken the deal at $1.5 billion, the company would have been valued at about 11 times revenue, a good multiple historically for a software company growing at 30% annually. At Monday’s close, the public market is valuing BigCommerce at about 44 times sales. That’s rich, but still less than Shopify, which trades for 62 times sales.
Founded in 2009, BigCommerce originally served small businesses, but eventually moved to working with mid-sized businesses and enterprises. Customers include Ben & Jerry’s, Sony and Skullcandy. In its prospectus, BigCommerce names Shopify, Adobe’s Magento unit, Salesforce and WooCommerce (owned by WordPress parent Automattic) as competitors.
Intuit, known mostly for its tax software, has already announced one of the bigger tech acquisitions this year. In February, the company said it was buying personal finance site Credit Karma for $7.1 billion, a deal that’s currently under regulatory review. In June, Intuit said it was raising $2 billion through a debt sale to finance some of the costs of acquiring Credit Karma as well as other purposes including the “possible acquisitions of businesses or assets or strategic investments.”
