Two large private Tech companies announced IPO price ranges this morning, with Toast targeting a market value of nearly $ 18 billion at the top of its range and Freshworks seeking to value its equity between $ 28 and $ 32. per share. TechCrunch calculates that the company would be worth around $ 8.9 billion at $ 32 per share, without using a fully diluted number of shares.
Including stocks represented by fully vested options and the like, Freshworks’ valuation could reach $ 9.6 billion, Renaissance Capital reports.
Unlike Toast, with a revenue mix comprising four separate products, Freshworks is a simpler software company. This means that we can do a much more interesting job to understand its valuation. So this morning, let’s find out how Freshworks plans to value in its IPO at its current range, take a look at some market compositions, and conclude if we expect the unicorn to increase its valuation before it floats.
Lies, damn lies and income multiples
As a reminder, in the first half of 2021 (Q1 and Q2), Freshworks achieved sales of $ 168.9 million. That annualizes to $ 337.9 million, thanks to digital rounding.
With a valuation of $ 9.6 billion – remember that simple IPO valuations for the company and lower price points of its IPO lineup generate inferior valuations and therefore more conservative multiples than what we’ll be discussing here – Freshworks would be worth 28.4 times its current revenue execution rate, set in the first half of 2021.