ServiceTitan Sets IPO Price Range, Aims to Raise to $514 Million
ServiceTitan, a leading cloud business software provider, has announced its initial public offering (IPO) price range at $52 to $57 per share. The company aims to raise between $446.2 million and $514.2 million at the midrange of this pricing.
In a strategic move, ServiceTitan plans to allocate a significant portion of the IPO proceeds, approximately $311 million, to repurchase nonconvertible preferred stock at $1,000 per share. The remaining funds will be used to cover unpaid dividends for these shares and serve as working capital for other corporate purposes.
The preferred stockholders include Saturn FD Holdings, LP, and Coatue Tactical Solutions PS. ServiceTitan had been facing high annual dividend obligations of 10% for five years and 15% for the sixth year. Major investors in the company include ICONIQ Growth, Bessemer Venture Partners, Battery Ventures, and a TPG entity.
In 2022, ServiceTitan granted Series H round investors a “compounding IPO ratchet structure.” This agreement requires the company to cover losses if the IPO share price falls below $84.57, the price paid by Series H investors. Additionally, if the IPO is delayed past May 22, 2024, Series H shareholders will receive additional shares.
Venture capitalist Alex Clayton commented on the IPO, highlighting the strategic move to clean up the company’s cap table by buying back preferred stock. Clayton suggests that IPO pricing games might lead to a higher trading price than the initial range, predicting trading in the high $60s or low $70s, potentially creating positive market excitement.
ServiceTitan has also implemented a direct share program, setting aside 5% of shares for friends and family of founders and certain C-suite decision-makers of customers. This move has raised potential conflict-of-interest concerns, as customers could also become shareholders. Similar private stock sales have been observed in other recent IPOs, such as Reddit.
While ServiceTitan’s IPO could either impress or disappoint investors, experts caution that it may not be indicative of a broader tech IPO resurgence. The company did not immediately respond to requests for comment on the IPO pricing and strategy.
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