UiPath IPO Tests Investor Appetite for Cloud Software Companies

UiPath Raises $1.3 Billion in IPO

UiPath (PATH), a cloud-based software company which helps businesses automate tasks, debuted on the New York Stock Exchange yesterday. The company initially priced its IPO at $56 per share for a valuation of more than $29 billion late Tuesday. The shares then opened at $65.50 Wednesday morning, giving UiPath a market value of $34 billion. This was the most high-profile IPO in the cloud software industry since Snowflake (SNOW) made its public debut in September.

UiPath’s IPO is a test for the cloud software market. Valuations for cloud companies have risen to what some investors consider frothy levels. At the same time, investor dollars are shifting away from high-growth tech due to rising interest rates. One barometer for the industry, the WisdomTree Cloud Computing index, has tumbled more than 7% so far this year., The index is underperforming the Dow Jones Industrial Average, which is up more than 10%.

UiPath Valuation Down Since February

Heading into UiPath’s IPO, shares were priced between $52 and $54 per share, giving the company a lower valuation than two months ago. In a financing round in February UiPath was valued at $62.28 per share, or $35 billion. Uncertainty about demand for cloud software as businesses reopen is also weighing on valuations.

Nevertheless, UiPath’s IPO still raised about $1.3 billion. Snowflake, which raised $3.9 billion in September, and Qualtrics (XM), which raised $1.78 billion in January, are the only two enterprise software companies to raise more.

UiPath Sees Demand Surge Ahead of IPO

UiPath may be garnering slightly less interest from investors, but internally, the company is firing on all cylinders. Its revenue is up 81% year-over year and its losses narrowed from $519.9 million in 2019 to $92.4 million in 2020. It has gross margins of 89%, which is high even for a software company. UiPath also has a net revenue retention of 145%, which means its average customers increased spending 45% year-over-year. Investors will be eager to see how the newly public company performs in the upcoming weeks.

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