Pivotal Notches $555M IPO to Boost Enterprise Software in the Cloud
Pivotal Software is the latest to jump into an improving public market for tech companies—the San Francisco-based software business is raising $555 million in its initial public offering today.
Pivotal said it priced 37 million shares for $15 apiece in the offering, in the middle of its expected range. The IPO still leaves Dell Technologies as the majority shareholder of Pivotal, however, with a 70.1 percent stake. Dell also owns almost all of the voting power for the company. Pivotal is set to trade on the New York Stock Exchange under the ticker PVTL, starting Friday.
The stock offering gives Pivotal a valuation of about $3.8 billion, based on the number of shares the company’s regulatory filing says will be outstanding. Ford Motor Company, which previously invested along with Microsoft in a $253 million Series C funding round, still owns about 17.5 million shares of Pivotal and won’t sell any in the IPO, according to a regulatory filing. (It’s unclear whether Microsoft still has a stake.) General Electric also planned to invest $105 million for a 10 percent share in 2013. GE is selling almost 3.9 million of its 19.4 million shares in the IPO, according to the filing.
EMC, the Hopkinton, MA-based data storage and cloud computing business, unveiled Pivotal as an independent company (in terms of its operations, at least) in 2013. Taking staff and resources from EMC and VMware, EMC’s virtualization subsidiary, Pivotal had the goal of helping large enterprise businesses gain access to cloud infrastructure and develop and iterate on software, in particular software that could be used in the cloud, more quickly, efficiently, and productively—much like fast-moving Internet tech companies, from Google and Amazon to small startups. (The company took its name from Pivotal Labs, a software development business that was acquired by EMC in 2012.)
When Dell agreed to acquire EMC in 2015 for $67 billion, it also gained control of Pivotal. The move by Dell to take the Pivotal business to the public markets follows a string of deals the company has made since announcing its mega EMC acquisition, including the sale of its IT services business to NTT Data Corp. for $3 billion and the sale of Mozy to Carbonite for $145.8 million.
Pivotal’s primary software, Pivotal Cloud Foundry, allows the software developers and IT workers at big companies—in particular, companies with antiquated and siloed software development and IT teams—to work more like agile developers, who can use open-source software and public clouds, despite potential concerns about security risks because those resources aren’t private enough. (Many developers at large companies work in old systems that don’t allow for modern agile development, and there are often many software systems being used so it can be difficult for developers to integrate them.)
Pivotal says its software has features such as security and credentialing frameworks to address privacy concerns, and allows users to connect to a variety of cloud services, from public ones like Amazon Web Services, to private or open-source clouds. It also includes an application platform to help with development, testing, and other programming tools, as Xconomy has previously reported.
In addition, Pivotal offers a training and consulting service for companies and their developers, called Pivotal Labs.
The company makes money by selling its platform as a subscription service, and says it has 319 business customers. That resulted in $259 million of revenue in the 2018 fiscal year (which ended Feb. 2), up from $95 million in the 2016 fiscal year (which ended Jan. 29, 2016), according to a regulatory filing. Pivotal still operates at a net loss, however, which declined to $163.5 million from $282.7 million during the same periods.
Net losses haven’t kept investors from buying up stock in other public tech companies. Dropbox raised $756 million in its public debut in March, despite a $111.7 million loss in 2017. The company did have $1.1 billion in revenue that year. Other IPOs this year include Zuora (NYSE: ZUO), a San Mateo, CA-based software subscription service, and Swedish music-streaming company Spotify (NYSE: SPOT).
Pivotal is hoping the public markets are a good fit and that it can use its proceeds from the IPO for general corporate purposes, such as growth of its business. That might include acquisitions or investments, the company says, though it hasn’t revealed any specific plans yet.