ON24 stock jumps 45% after IPO

ON24 said early Wednesday that its initial public offering priced at $50 a share, with the pricing coming in at the high end of its expected range of $45 to $50 a share. The company raised at least $315 million through the offering.

ON24 runs a streaming platform for interactive webinars and live events that sales and marketing teams can use as a way to generate more business. Chief Executive Sharat Sharan said that the company built the platform with a focus on user engagement, meaning that prospective customers attend a business’s virtual presentation and answer various questions throughout the event, giving sales team a better idea of the customers’ intent to buy.

The company uses artificial intelligence to deliver more targeted experiences on the platform, Sharat said, such as by recommending future content for a prospective customer to engage with based on what this person has indicated so far about buying intent.

The company is “clearly benefiting from COVID-19 trends,” wrote MKM Partners analyst Rohit Kulkarni. ON24 recorded revenue of $103.7 million for the first nine months of 2020, up from $63.2 million in the comparable period a year prior. That 59% growth compares with revenue growth of just 8% from all of 2018 to all of 2019.

“While ON24 is a 20-year-old Silicon Valley company, we believe the pandemic has fundamentally (and serendipitously) benefited ON24’s product-market fit given the trends in internet-based B2B [business-to-business] selling with virtual conferences, webinars, and adoption of video conferences,” Kulkarni wrote.

Still, he said the company faces some risks amid potential competition from Zoom Video Communications Inc. ZM, -3.21% and others, as well as uncertainty over what business trends will look like once the pandemic subsides.

Sharat told MarketWatch that Zoom is “a great company” but more of a utility at this stage, whereas ON24 is “purpose-built for marketing and engagement.” He also predicted “sustainable tailwinds for the foreseeable future” as businesses have accelerated their digital transformations by perhaps a decade during the first 10 months of the pandemic.

ON24 saw net income of $11.2 million in the first nine months of 2020, versus a loss of $14.1 million in the same period a year earlier.

Sharat said that ON24 is now “going pretty hard” on growth investments meant to build market share and brand, but that the company “will continue to be judicious about how we spend the money as long as unit economics work well.”

ON24’s IPO comes as the Renaissance IPO ETF IPO, +0.36% has risen 38% over the past three months and as the S&P 500 SPX, +0.22% has increased 14%.