Bad stock market climate stops WeTransfer, possible later attempt or other options

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Bad stock market climate stops WeTransfer, possible later attempt or other options

As effortless as WeTransfer transfers gigabytes, the company’s own transition is so difficult. On Thursday morning, the Dutch tech company pulled the plug at the very last minute from an IPO that should have taken place on Friday. The immediate reason, WeTransfer CEO Gordon Willoughby said in a press release, is the volatile trading in tech stocks.

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For the first trading day of the ‘WT’ share on Euronext, the definitive price of the share would be determined on Thursday. It was already lower than expected; WeTransfer shaved off some of its supposed valuation last week.

According to initial estimates, the company would be worth more than a billion dollars (883 million euros). That expectation was belied with a valuation between 612 million and 716 million euros, which amounts to 17.50 to 20.50 euros per share.

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It is more common for stock exchange plans to fail, but it is unusual for an IPO to be canceled so short in advance.

The conditions on the stock markets therefore do not look very favourable. Investors are concerned about the Fed’s interest rate policy, which confirmed it would make the first of several rate hikes in March. And if there’s one thing investors don’t like, it’s that: uncertainty. This is especially evident in tech stocks. In one month, the US Nasdaq plummeted from nearly 16,000 to 13,500 points.

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Since WeTransfer announced its IPO two weeks ago, the US Nasdaq index plunged 9 percent and European tech stocks lost 6 percent. You should not introduce a new share in such a bleak stock market climate, WeTransfer ruled on Thursday.

Last fall, online store Coolblue postponed an IPO “until further notice”. Uncertainty in the equity markets also played a decisive role here. “The current uncertainty in the financial markets scares off potential investors,” said Coolblue CEO Pieter Zwart. “Particularly when it comes to new IPOs in e-commerce.”

A premium version

WeTransfer is an online service provider that allows you to transfer files (up to 2 GB in size for free). The paid version has 387,000 users. Those subscribers are mainly in creative sectors such as photography, design agencies and advertising companies; the sector in which people often send each other and many large files. WeTransfer also provides software with which you can screw together presentations.

WeTransfer sees Microsoft, Google as well as Dropbox and Adobe as competitors

More than half of the revenue (estimated WeTransfer turnover in 2021: 105 million euros) comes from advertisements that users see for free when they upload or download a file via a web browser. In 2020, WeTransfer’s turnover amounted to 65 million euros. Most of these come from Europe.

The office from WeTransfer in Amsterdam.

WeTransfer hopes to grow faster in 2022 with the introduction of a new paid service that will give subscribers some additional features, such as unlimited file transfer and storage. This ‘premium’ version costs almost double the current paid offer: 23 instead of 12 euros per month. That’s a big jump for an upgrade, at a time when the prices of cloud storage are actually falling.

WeTransfer saw an increase in interest due to the growing number of homeworkers. However, expanding to other branches, outside the creative sector, is difficult for WeTransfer because the business community often uses different types of software suppliers.

The rise of hybrid working due to corona has made many companies invest extra in new collaboration software. In doing so, they often choose well-known names and that plays into the hands of large tech companies such as Google and Microsoft; You can also send and share large files with Google Workspace or Microsoft Office. Microsoft announced a 20 percent increase in revenue this week.

WeTransfer also counts tech companies such as Dropbox, Box and Adobe among its competitors. Under the leadership of founder Bas Beerens, WeTransfer held takeover talks with Dropbox long ago. But the company opted for self-directed growth, with the help of European investor Highland, who joined in 2015.

Bad stock market climate stops WeTransfer, possible later attempt or other options

Also read: European stocks turn red due to ongoing interest rate concerns

Since then, WeTransfer has grown from 30 to 300 employees and its turnover has increased fivefold. The growth of new users, however, remains limited. WeTransfer now has 87 million monthly users – that was about 70 million in 2015. The company has been profitable since 2013, but went into the red in 2021, due to higher marketing costs. WeTransfer does not want to say more about it.

Investors hold on

WeTransfer wanted to issue 125 million euros in new shares to grow. In addition, existing investors would sell part of their interest. The main stakeholders in WeTransfer are Highland (54.9 percent) and HPE Growth (12.9 percent). Founder Bas Beerens still has a large interest that would have been worth 62 million euros in the event of an IPO. Rob Defares, of stockbroker IMC, has 2.2 million shares that would be worth around 40 million euros on paper. A smaller share of WeTransfer is held by employees (0.4 percent) and management (0.8 percent).

None of the stakeholders would like to comment on the canceled IPO at this time. Only Irena Goldenberg, who is a supervisory director on behalf of investor Highland in the umbrella parent company WeRock, says in a written response that the absence of a stock exchange listing will make no difference to her company. “WeTransfer has demonstrated a strong track record of profitable growth,” said Goldenberg.

“We joined WeTransfer seven years ago and it has always been our intention to remain a long-term partner of WeTransfer. The fact that market conditions mean that the company will not go public at this time does not change those intentions,” said Goldenberg.

The intended IPO was prepared by investment banks Morgan Stanley and BofA Securities. ABN Amro also participated and would trade 12.5 percent of the available shares. Judging by the prospectus, it appears that WeTranfer will not be required to pay any damages for canceling the IPO.

Parties that have already subscribed to a WT share will have to be patient. WeTransfer says there was ‘substantial interest’ in the stock,

According to sources around the company, there is no time pressure to go public now. A later attempt at listing is not ruled out, but management would consider several options. The company does not want to make any statements about what those are, and when.

With the cooperation of Annemarie Sterk and Geertje Tuenter

Bad stock market climate stops WeTransfer, possible later attempt or other options
Source link Bad stock market climate stops WeTransfer, possible later attempt or other options

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