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Zuora’s Lock-Up Period Ends Tomorrow

Zuora Inc. is a Software-as-a-Service that recently went public in April of 2018.  This was one of the most popular tech initial public offerings of the year.  The offering valued the company at $1.44 billion and successfully raised $154 million after selling 11 million shares at $14 a share.  The first day of trading on the New York Stock Exchange, ZUO had a volume of 13 million shares and a high of $21.85 a share.  This already marked a 56% gain from their IPO price.

Tomorrow, October 9th, 2018, the lock-up period on the initial public offering is set to expire.  This means shares owned by insiders and major shareholders are now allowed to be traded.  Many initial public offerings include a lock-up period for various reasons.  This potentially could lead to a minor sell-off, since the shares are now trading at $19.91 a share which is 42.2% up from the IPO price.

Institutional interest in the stock is fairly high, with 19.37% of shares being held by institutions.  There are currently 72 institutions holding shares of Zuora, with the largest holders being Blackrock Inc., Alkeon Capital Management Group LLC, Federated Investors Inc., Vanguard Group Inc., and Gilder Gagnon Howe & Co LLC.  Institutions have bought up 11.8 million shares for a total value of $250 million.  Marc Benioff, the Founder of Salesforce, owns 2.9 million shares of Zuora.

In terms of performance, Zuora has been performing considerably well over the last two quarters.  The company reported revenue of $57.7 million primarily from a rise in Subscription services but also professional services.  Sales have grown 46.55% compared to the previous year and 11.6% compared to the previous quarter. The company’s main operating expense is their sales and marketing, which helped their sales numbers but has hurt their margins.

The company focuses primarily on producing and marketing software solutions that enable companies to create their own subscription-based service.  Their software helps companies launch and manage a subscription service that includes quoting, billing, and analytics.  Many industries are leaning towards subscription-based offerings as they prove to provide more predictable revenue as well as retain customers.  Companies like Microsoft, have begun converting their one-time paying customers onto a subscription-based platform, called the Azure Stack.

Subscription-based platforms are on the rise, will Zuora’s SaaS solution be the top-dog in the market?

 

 

 

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