Rally Investors, Executives Cash In With $114M Follow-On Offering
Three Boulder-based venture capital firms are about to be rewarded for their stakes in Rally Software, as they will soon sell shares in company’s follow-on public offering.
Rally (NYSE: RALY) announced last week it was conducting the offering, and on Thursday it priced the shares. They will be available to the public at a price of $24.75 per share. Rally also upsized the offering to nearly 4.9 million shares.
Rally develops cloud-based software development tools and is headquartered in Boulder, CO. The company went public in April with an $84 million IPO and hasn’t looked back since. Rally priced the shares at $14, and the share price has since climbed about 90 percent. The stock closed Thursday at $26.18 per share, giving the company a market capitalization of $627.9 million.
According to the prospectus Rally filed with the SEC, the follow-on offering ultimately will yield Rally about $5.9 million and major investors about $108.5 million, after the offering’s underwriters take their cut.
For Rally, the offering increases its public float and gives it greater financial stability, according to its filing. It also raises some additional money for the company.
For shareholders, the offering is a chance to cash in some of their stock as the shareholder base diversifies and the VCs specializing in early stage investments continue their exits.
How much money the investors will generate becomes clear after running some numbers from the prospectus. After underwriting discounts and commissions are taken out of the share price, Rally and the selling stockholders sold their shares at about $23.54.
Mobius Technology Ventures and Boulder Ventures and the limited partners and affiliates of those firms are cashing out large stakes. Mobius and Boulder Ventures will sell about 1.2 million shares each, which resulted in about $28.6 million apiece. Each firm will retain 9 percent of Rally’s shares, which was worth about $57 million at the close of trading on Thursday.
Boulder Ventures and Mobius have ties to Rally that go back more than a decade, back to when the company was known as F4 Technologies. Ryan Martens, Rally’s current chief technology officer, founded the company in 2001.
Boulder Ventures and Mobius were the first VC firms to make early stage investments in Rally. Mobius is Foundry Group managing director Brad Feld’s former firm. Feld and Boulder Ventures general partner Peter Roshko were on Rally’s board from 2003 to March 2013.
Vista Ventures will sell 193,992 shares, which will be good for about $4.6 million. Vista isn’t really active anymore, but in the early and mid-2000s it made early stage investments in a number of Colorado startups.
Rally’s founder and top executive also are selling shares. Martens is selling $2.8 million worth of shares, after which he will retain a 3.6 percent of Rally’s shares. As of Thursday, those shares are worth $22.9 million. CEO Tim Miller will sell $2.5 million worth of shares. Miller will then own 2.9 percent of Rally, which is worth $18.4 million.
Deutsche Bank Securities and Piper Jaffray are acting as joint book-running managers, with Needham & Company, JMP Securities, William Blair & Company, and Wunderlich Securities, Inc. acting as co-managers for the offering.
The underwriters expect to deliver the shares of common stock to purchasers on July 30, according to the prospectus.