Yext Shares Up Sharply in Initial Day of Trading, Portending Well for Local
Yext‘s shares jumped nearly 22% in the company’s initial day of trading, with the price rising as high as $14.25 per share before settling to $13.41 at close. That left the company significantly above its $11 open and the original $8-$10 range it had set.
The strong opening was a hopeful message from Wall Street for the local marketing industry, which has been looking to Yext’s IPO as a bellwether amid a potential industry-wide consolidation.
“The local origins of this company amplified out to the worldwide opportunity speaks to the power of mobile and consumer expectations about data and services,” said Gasbuddy CEO Walt Doyle. “Accuracy is paramount and the value of that was seen today as Yext rang the bell in one of the most successful IPOs of the year.”
The company, whose main product is a listings management solution for brands and small businesses, was founded in 2006. In its updated S1 last month, Yext reported $124 million in revenue in the 12 months leading up to January 31, 2017, which represented a 38% increase over the prior year. The company reported a loss of $43.2 million in that period. Yext raised $115.5 million in the offering.
Revolution Ventures managing partner Tige Savage said the successful IPO portended well for the prospects of local marketing companies.
“Yext has not been profitable and has a relatively small market capitalization, usually strikes against a strong IPO and subsequent stock performance, yet the pricing was stronger than expected,” said Savage. “Strong post-IPO performance of Yext’s stock could signal both IPO investors’ willingness to forego proven profitability as a condition of a successful listing (opening the market to smaller, younger tech companies) and to overcome skittishness around SMB-driven businesses related to the traditional concerns of small customer revenues and high churn (opening the market to local marketing companies).”
Meanwhile, top executives at other local companies also expressed enthusiasm today about the IPO’s positive reception.
“When the first human achieved a four-minute mile, many more followed shortly thereafter,” said Empyr CEO Jon Carder. “Having a local company pass the $1 billion mark gives that extra bit of confidence to investors and entrepreneurs alike, that it is achievable. It also sets realistic expectations that this took over $100 million in funding and took 11 years.”
Tom Kenney, president and CEO of Verve, agreed: “For companies like Verve, building out the mobile ecosystem that is taking over advertising and marketing requires scale, and successful mobile IPOs like Yext — and Snapchat, and hopefully more in the near future — provide greater leverage and even more optionality to achieve that scale. This kind of growth is crucial, and it’s beneficial for everyone.”
Local SEO Guide‘s Andrew Shotland (who, full disclosure, counts Yext as a client) thought the strong opening was likely driven both by investor excitement about the company as well as excitement about tech IPOs: “The promise of Yext’s model, and tech in general, is the ability to serve a virtually limitless set of customers at zero marginal cost. Yext marries this dynamic with the huge potential of the local digital market.”
Shotland noted that Yext is still in the early stages of its business plan, and that the company had yet to prove that it can scale while managing costs while continuing to innovate.
Yext had previously raised $117.8 million in seven rounds from investors including Grape Arbor VC, CrunchFund, Insight Venture Partners, Institutional Venture Partners, SV Angel, Sutter Hill Ventures, WGI Group as well as some individual investors. The company was advised by Morgan Stanley, J.P. Morgan and RBC Capital Markets for the offering, while Pacific Crest Securities and Piper Jaffray acted as co-managers.
David Hirschman is a co-founder of Street Fight.