Database software developer MongoDB’s initial public offering hit the stock market on Thursday with a Goldilocks-like level of enthusiasm from investors.
After MongoDB’s underwriters expected to price the new shares at between $20 to $22 each, they found stronger than expected demand on Wednesday night and re-priced the shares at $24. When the stock started trading under the symbol “MDB” on Thursday, it saw a modest 34% jump. By increasing the price before trading began, the underwriters captured more of the gain for the company’s coffers.
Still, the company’s $1.2 billion valuation was below the $1.6 billion level it attained after raising private capital in 2015. Then with the 34% gain during Thursday’s trading, MongoDB regained the $1.6 billion level.
The successful debut marks a run of recent welcome reactions to tech IPOs. Also this week, Qudian went public and gained 40% and CarGurus rose 78%, according to Renaissance Capital. Switch (SWCH) is up 10% since its October 5 IPO and Roku (ROKU) has gained 58% since it went public on September 27.
MongoDB (MONGODB) CEO Dev Ittycheria says the funds raised in the IPO will go to working capital that he expects to spend ramping up sales teams and pouring into new product development. The company’s software tools help companies like MetLife (MET) and Staples (SPLS) build applications on top of its NoSQL database. NoSQL databases handle untidy data that doesn’t fit easily into the row-and-column grids of traditional relational databases known as SQL databases.
“We see a massive opportunity in front of us,” Ittycheria said in an interview. “We are going after one of the largest segments in the enterprise software market.”
Revenue has increased rapidly, but the company is not yet profitable. Sales of $68 million in the six months through July 31 were up 51% from the same period a year earlier, while a net loss of $46 million was 1% higher. That makes MongoDB still a pretty tiny player amid the $45 billion IDC estimates was spent on database software last year, largely with market leaders such as Oracle (ORCL) and Microsoft (MSFT).
Founded by DoubleClick co-founders Dwight Merriman, Eliot Horowitz and Kevin Ryan after they sold to Google, the idea for MongoDB arose out of the challenges they saw at the advertising technology firm for database software that worked in real time at high volume. Currently, MongoDB’s database software is ranked fifth in popularity by web site DB-Engines, trailing programs from Oracle, Microsoft and two open source platforms.