Mimecast, Square IPOs Disappoint in Challenging Environment for Tech

[Updated 11/19/15, 4:33 pm. See below.] It’s a disappointing day for tech IPOs in Boston and elsewhere.

Mimecast, a U.K. e-mail management and security firm with a significant presence in Watertown, MA, is set to go public Thursday with an offering of 7.75 million shares priced at $10 each, which raised $77.5 million. That fell short of the nearly $107 million the company previously said it intended to raise on the high end of its projected stock price range, by selling 8.9 million shares at $12 apiece.

Mimecast’s underwriters have a 30-day option to buy an additional 591,000 shares from the company, and another 571,500 shares from certain shareholders.

Mimecast hits the public market at a time when tech companies are having no trouble raising boatloads of private money, few of them are going public, and the ones who do are struggling to impress public investors.

San Francisco-based Square, one of the closely watched “unicorn” startups valued above $1 billion by private investors, also priced the shares in its IPO below its earlier target. It set a price of $9 per share late Wednesday, below the projected range of $11 to $13, and a far cry from the $15.46 at which it raised a round of private financing last year, the Wall Street Journal reported. Square intends to begin trading Thursday on the New York Stock Exchange under the ticker SQ.

And last month, Atlanta-based First Data (NYSE: FDC) raised $2.6 billion in its IPO, but priced shares below its target range, and its stock price declined in early trading.

Meanwhile, cybersecurity firm Rapid7—the only Boston-based tech company to go public so far in 2015—had a successful $103.2 million IPO in July. Its shares priced above their expected range and then rose in value on the first day of trading.

Cybersecurity companies (and tech startups in general) have been scooping up tons of venture capital lately. Bit9 + Carbon Black, Cybereason, Onapsis, and Confer are among the cybersecurity firms based in the Boston area that have raised big rounds this fall.

But Mimecast, a 12-year-old company that had raised more than $95 million in venture capital, decided the time was right to go public. Perhaps it’s better to do so now, in case the IPO window slams shut. But backers are no doubt hoping Mimecast’s share price climbs when it begins trading on the Nasdaq stock exchange Thursday under the ticker symbol MIME.

Mimecast sells cloud-based software to help businesses securely store and manage their e-mail accounts. In its IPO registration document, the company reported a $300,000 profit on $116.1 million in revenue for the most recent fiscal year, compared with a $16.9 million net loss on $88.3 million in sales during the previous year.

It employs more than 500 people at nine offices in the U.S., the U.K., Australia, and South Africa.

UPDATE: Mimecast stock traded as high as $11.99 per share on Thursday, before closing the day at $10.10. Square fluctuated between $11.05 and $14.78 per share, and it ended the day at $13.07—45 percent higher than the $9 price it set the previous night.

Jeff Engel is Deputy Editor, Tech at Xconomy. Email: jengel@xconomy.com Follow @JeffEngelXcon

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