Glendale’s software company ServiceTitan saw its shares soar 42% after debuting Thursday on the Nasdaq in its initial public offering.
The provider of business management software for plumbers and other contractors priced its initial public offering of 8.8 million shares at $71, raising gross proceeds of $625 million. The shares, which had reached $105 in early afternoon trading, closed at $101. The company has the potential to raise more capital if underwriters exercise a 30-day option to sell an additional 1.32 million shares.
The shares, which trade under the ticker TTAN, were initially priced at $52 to $57 before being raised to a range of $65 to $67 earlier this week, indicating that demand for the offering has increased. At its debut price of $71, the company had a market value of $6.42 billion, lower than its $7.6 billion valuation after a November 2022 funding round. However, the increase in share price pushed the company’s market capitalization to end of trading $9.1 billion.
“I was a bit surprised. I don’t think even the underwriters expected this,” said Riley Mullin, an analyst at Renaissance Capital, who noted that the closing price was almost double the low end of the initial IPO price range, making the company “richly valued.”
He said ServiceTitan benefited from strong interest in software and technology stocks, including artificial intelligence, as well as investor excitement about the incoming Trump administration.
There have been only a handful of software IPOs this year, with ServiceTitan being the largest since data management company Rubrik went public in April. However, there are signs that the market is recovering after being hit by inflation and interest rate hikes by the Federal Reserve.
ServiceTitan counts around 8,000 contracting companies as customers and offers a software package that can manage booking appointments, generate estimates and process invoices, as well as payroll administration and temporary workers. Customers range in size from family-owned businesses to large national franchises with a total of more than 100,000 technicians. The companies pay a subscription fee for their services.
More than $300 million of the IPO proceeds will go toward canceling all of ServiceTitan’s non-convertible preferred stock, a class of stock that typically pays holders a consistent dividend but cannot be converted into common stock. The company, which is looking to expand the number of transactions and markets it serves, will use the remainder for general corporate purposes and potential acquisitions.
ServiceTitan was founded in 2007 by two college friends from Glendale, Ara Mahdessian, 39, and Vahe Kuzoyan, 41, whose fathers worked as contractors. They both moved to LA as young children in the ’80s: Mahdessian from Iran and Kuzoyan from Armenia.
At an opening ceremony, Kuzoyan, the company’s president, called the trading debut “a very special day for ServiceTitan, but more importantly, it is an incredible milestone for this very special industry.”
The event also grew into a celebration of the founders’ parents, who rang the opening bell. “Our parents came to this country with no language and no money, and this industry allowed them to realize the American dream,” Kuzoyan said.
ServiceTitan had 2,870 employees as of July 31 at its Glendale headquarters and offices elsewhere in the U.S. and internationally. Competitors include BuildOps, Housecall Pro, Jobber and other companies that charge subscriptions for their web-based business management software.
The company previously raised approximately $1.4 billion from venture capital firms including Iconiq Growth, Bessemer Venture Partners and Battery Ventures. The company had filed confidential paperwork for an $18 billion IPO in 2022, according to Business Insider, but did not proceed with it when the market froze.
ServiceTitan reported revenue of $614 million in the fiscal year ended Jan. 31, up nearly a third from a year earlier, and an operating loss of $195 million, down 28% from fiscal 2023. It had about $147 million in cash and equivalents. available on January 31 and had net long-term debt of $175 million.
The company’s share structure will ensure that control remains with the co-founders. They will retain all of ServiceTitan’s Class B shares, each of which is entitled to 10 votes when shareholders make decisions about the company’s leadership.
Lead underwriters for the IPO are Goldman Sachs Group, Morgan Stanley, Wells Fargo and Citigroup.
