Shares of Waltham, MA-based software intelligence firm Dynatrace hit the public markets for the first time today, and it was a strong debut. Bankers elevated the initial stock pricing above earlier estimates, and then traders pushed the value higher, to $25 a share at midday.
The first IPO this year of a tech company headquartered in the Boston area, Dynatrace (NYSE: DT) sold 35.6 million shares of its stock for $16 each, bringing in about $544 million to the company, an amount calculated before commissions and other fees, the company said.
Two other companies with major presences in Boston have gone public so far this year: Chewy (NYSE: CHWY) and Tufin (NYSE: TUFN). Chewy has a co-headquarters in Boston, but lists Dania Beach, FL, as its principal executive offices. Tufin has its US headquarters in Boston, but its corporate headquarters are in Israel.
With Dynatrace shares trading at $25 each on the New York Stock Exchange, the company is valued at just north of $7 billion.
Dynatrace CFO Kevin Burns says rising investor interest grew the initial share pricing estimate of $11 to $13 to the new range of $13 to $15 earlier this week, then to the $16 a share it initially sold for on Thursday. He said the company’s recent pivot from licensing its software to selling subscriptions, as well as a renewed refocus on the enterprise cloud, got investors’ attention.
“We spent the last week and a half on the road with investors,” Burns tells Xconomy. “The reinvention of the Dynatrace company and the success we are having on that platform is really resonating.”
Most of the proceeds from the stock sale—about $400 million—are earmarked for paying down Dynatrace’s debt load, which is currently around $1 billion, Burns says. He adds that the plan is to work the debt to zero within three to four years.
Dynatrace, at about 2,000 employees currently, makes intelligence software to help businesses manage applications across complex systems like multiple cloud services and on-demand computing operations.
Co-founder and CTO Bernd Greifeneder (pictured above, at right, along with company CEO John Van Siclen) says the company’s software helps companies move from the buggy, early stages of a digital application’s lifecycle—a period that can be plagued by outages and growing pains—to mature systems.
“We help them to move along from reactive to proactive,” Greifeneder says, adding that the goal is to help companies “focus on the business” rather than the software behind it.
Private equity firm Thoma Bravo will maintain a 71.4 percent controlling stake in the company after the public offering. Dynatrace says it expects to report that it lost as much as $53 million in the most recent financial quarter ending June 30. It estimates it had $107 million in sales during that same period.
Dynatrace launched in Austria in 2005, but it was brought to the Boston area through an investment from Bain Capital Ventures in 2006. Dynatrace’s venture investors sold the company to Detroit-based Compuware in 2011 for $256 million. Thoma Bravo bought Compuware in 2014 for $2.5 billion and decided to spin out Dynatrace as its own company.
Dynatrace says its software competes with Cisco (NASDAQ: CSCO), Broadcom (NASDAQ: AVGO), New Relic (NYSE: NEWR), Datadog, Nagios, Akamai (NASDAQ: AKAM), Catchpoint, as well as cloud computing providers including Amazon (NASDAQ: AMZN) and Google (NASDAQ: GOOGL).