Shares of ServiceTitan rose 42% in their Nasdaq debut on Thursday after the provider of cloud software to contractors raised about $625 million in its initial public offering.
The company, trading under ticker symbol TTAN, sold shares on Wednesday for $71 each, above the expected range. The stock opened and closed at exactly $101 per share. Based on the closing price, the company’s market capitalization was approximately $8.9 billion.
ServiceTitan’s IPO is notable because few tech companies have made the leap to the public market since late 2021, when rising interest rates and soaring inflation pushed investors out of risky assets. ServiceTitan is the first major venture capital-backed technology company to go public since then Rubrics debut in April. A month before, Reddit began trading on the New York Stock Exchange.
Other companies have suggested an IPO could happen soon. Chipmaker Cerebras filed to go public in September, but the process was delayed due to an investigation by the Treasury Department’s Committee on Foreign Investment in the US (CFIUS). Last month, online lender Klarna said it had confidentially filed IPO paperwork with the U.S. Securities and Exchange Commission.
While late-stage startups are reluctant to take the plunge into the public market, investors are showing growing interest in technology.
“The reception is great. The water feels wonderful,” Vahe Kuzoyan, president of ServiceTitan, told CNBC in an interview. Nina Achadjian, a partner at Index Ventures and a board member of ServiceTitan, said she has received many text messages from other venture capitalists saying the outcome opens the door for more IPOs.
On Wednesday, the Nasdaq Composite index closed above 20,000 for the first time. Tesla, Alphabet, Amazon And Meta all closed at record levels, with Apple just below all-time highs.
ServiceTitan agreed to “compound ratchet” terms as part of a 2022 funding round, valuing the company at $7.6 billion, according to the prospectus. The decision “has put ServiceTitan on the cusp of going public as quickly as possible to minimize dilution effects,” investors at venture capital firm Meritech Capital wrote in a blog post.
But ServiceTitan CEO Ara Mahdessian said Thursday that the terms did not influence the decision to go public now.
“Anti-dilution terms are not uncommon in financings,” he said.
Kuzoyan and Mahdessian founded ServiceTitan in 2007. Before starting the business, Mahdessian said, his father was a jack-of-all-trades and Kuzoyan’s father owned a plumbing business. On Wednesday, the founders’ parents rang the opening bell at the Nasdaq in New York.
ServiceTitan targets companies in plumbing, landscaping, electrical, and other trades, with software for managing sales leads, recording calls, generating quotes, and scheduling jobs. As of Jan. 31, it had about 8,000 customers with more than $10,000 in annualized billings.
The company’s preliminary results for the October quarter show a net loss of approximately $47 million on revenue of $198.5 million. That indicates revenue growth of about 24% year-over-year, the highest rate since mid-2023. But the company’s net loss rose from about $40 million in the October quarter last year.
“Our view is certainly that investors really value sustainable growth,” Mahdessian said. “They appreciate that the cash flow is positive, which fortunately we have been in recent quarters.”
Bessemer Venture Partners, TPG and Iconiq Growth are among the company’s top shareholders, alongside Kuzoyan and Mahdessian.
At Thursday’s closing price, ServiceTitan was valued at twelve times its twelve-month turnover. The WisdomTree Cloud Computing Fund, a basket of more than 60 publicly traded cloud stocks, currently trades at approximately 6.4 times revenue.
