Rapid7 Prices IPO at $16 Per Share as Cybersecurity Takes Center Stage
Let the record show that it took until July 16 this year for a Boston-area technology company to have an initial public offering. That company is Rapid7.
The cybersecurity software firm (NASDAQ: RPD) expects to raise $103.2 million by selling 6.45 million shares at $16 per share, before fees and underwriter discounts. That share price is above the projected range of $13 to $15, and gives the company a market capitalization of just over $600 million. In addition, Rapid7 is selling 357,142 shares of common stock to lead investor Technology Crossover Ventures, and the company’s underwriters have a 30-day option to purchase up to an additional 967,500 shares. Trading is set to begin on the Nasdaq Friday.
Rapid7 recently filed paperwork that revealed its annual revenue increased from $31 million in 2011 to $76.9 million in 2014, but the company is not profitable (it lost $32.6 million last year). Before the IPO, the company’s top stakeholders included Technology Crossover Ventures, Bain Capital Ventures, and CEO Corey Thomas.
Last year, the Boston area saw tech-sector IPOs from Care.com, Imprivata, CyberArk, Wayfair, and HubSpot. The dearth of tech companies going public in 2015 is a nationwide phenomenon, as large amounts of private funding have been available for fast-growing companies like Uber, Airbnb, and Dropbox. Nevertheless, a few tech companies have had IPOs this year—Box, Etsy, and Fitbit come to mind. But some observers warn that the relative lack of exits and public scrutiny of companies’ spending, coupled with high valuations, are signs of a bubble—and that a big correction or downturn is coming.
Meanwhile, at least eight life sciences companies in the Boston area have gone public in 2015. The most recent is Newton, MA-based drug maker Chiasma (NASDAQ: CHMA), which raised $101.8 million in an IPO this week.
Other Boston-area security companies mulling over IPOs include Veracode, Bit9, and Mimecast. Patrick Morley, the CEO of Bit9 (which now bills itself as Bit9 + Carbon Black), calls Rapid7’s going public “validation of the impact they are having on the cyber security landscape.” He says the deal “reinforces that a new set of security companies are going to win the next-gen market.”
“Corey Thomas and the Rapid7 team have built a great business,” he adds.
Rapid7 was founded in 2000 by Alan Matthews, Tas Giakouminakis, and Chad Loder. The company’s software helps organizations check for security flaws in their IT infrastructure and respond to cyber attacks. Rapid7 raised about $90 million in venture capital and had 554 employees as of this spring.