To gain riches – go public or stay private and sell to a high bidder?
In a stock market that seems to continuously flirt with new highs, the answer seems to be: Aim for the IPO.
To that end, as reported earlier this week, BigCommerce, the software as a service (SaaS) firm that focuses on eCommerce, went public, surging more than 200 percent on its first day of trading.
In today’s environment, where stocks have rebounded sharply off lows seen during the pandemic, that leap (in share prices) may elicit little more than shrugs. But the twist, in this case, is that BigCommerce had been approached as recently as last month by tech giant Intuit – with an offer to buy the SaaS firm for $1.5 billion.
Ultimately, BigCommerce rejected the offer – and chose to go public.
Though the stock has backed off sharply as of this writing, trading at a recent $72, the market cap – ostensibly what the public markets would pay to “own” the company – stands at roughly $4.5 billion. That implies that the public valuation of BigCommerce is quite a bit more than the offer from the private markets.
In essence, BigCommerce has made the case, through the decision to forge ahead with its IPO, that it prefers to go it alone, so to speak, in its chosen field, helping enterprises (specifically SMBs) get up to speed in eCommerce and set up online stores.
Digging through the filings with the SEC, BigCommerce’s S-1 notes that “the transition from physical to digital commerce constitutes one of history’s biggest changes in human behavior, and the pace of change is accelerating.” That means, BigCommerce wrote, that desktop use is shifting to mobile, and that enterprises must deliver highly personalized online shopping experiences across channels. All of these shifts are being hastened by the challenges of the pandemic.
As PYMNTS has detailed though an ongoing series of consumer surveys, the shift to digital commerce is becoming ever more pronounced. In just a few examples: More than 42 percent of consumers surveyed are engaging in retail shopping via the web as of the end of May, up markedly from the 12.3 percent seen in March. More than 14 percent are buying groceries online, in the latest data, up from less than 4 percent in March.
If the lure of platforms and subscription models is enough to bring BigCommerce public (and pique investors’ interest), the numbers show strong upward traction. BigCommerce reported in its filings that revenue growth in the first quarter of 2020 was north of 29 percent, reaching $33.1 million, while the operating loss shrank to $7.5 million from $10.3 million.
But there’s another side of the coin here, too: namely, why Intuit would be interested in BigCommerce – or to put it another way, big commerce. You might know Intuit as the financial services company that is home to the personal finance app Mint and tax preparation app TurboTax, among other offerings. More recently, Intuit struck a deal to buy Credit Karma for $7.1 billion – one that is gaining scrutiny as the U.S. Department of Justice (DOJ) has launched a probe into the proposed business combination. At issue are antitrust concerns tied to the tax preparation market.
For Intuit, a BigCommerce deal might represent a broadening beyond pure financial applications toward a suite of tools that brings enterprises fully into the digital age. The two firms already have partnered together, as BigCommerce offers an app for Intuit QuickBooks Online, billed as an automated bookkeeping tool that is built into the BigCommerce backend. Cross-selling conceivably becomes that much easier, then, in an environment where getting online quickly, and with agility, is key.
For now, though, BigCommerce has made its choice to go it alone in the public realm as the digital shift winds on.