MindBody Inc., a San Luis Obispo-based company that sells business management software for clients in the beauty, health and wellness industries, went public Friday, raising $100.1 million to help fuel future expansion.
It sold 7.15 million shares at $14 per share.
But the stock, which is listed under the ticker symbol MB, officially opened trading on the Nasdaq market at $16.22 per share, closed at $11.56 a share, down 17.43 percent.
Investors are interested in MindBody because it’s an intriguing company with high growth, said Kathleen Smith, principal at Renaissance Capital, a Greenwich, Conn., provider of IPO-focused exchange-traded funds that provides portfolio management of newly public companies.
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But investors also have been cautious about companies that don’t earn money, she said, adding that profitability is at least a couple of years away for MindBody.
By going public, the company has the money it needs for expansion, Smith said. “Now it has to produce the results. If they do, then this initial poor day of trading will be a distant memory,” she added.
MindBody’s valuation is $452 million, based on 39,117,544 total shares and its closing price Friday. Rick Stollmeyer, co-founder and CEO, now owns about 8.6 percent of the company, and chief operating officer Robert Murphy owns 5.7 percent.
Other top owners are entities affiliated with Bessemer Venture Partners, 16.6 percent; entities affiliated with Catalyst Investors, 12.7 percent; Institutional Venture Partners XIII, 8.2 percent; and W Capital Partners III, 7.2 percent. Entities affiliated with J.P. Morgan own 8.3 percent and more if it bought the 10 million shares that it planned to buy through the IPO, Smith said.
Founded in 1998, MindBody has more than 42,000 business subscribers that pay a monthly fee to use its mobile-enabled SaaS (Software as a Service) platform in 124 countries and territories employing more than 250,000 practitioners.
According to MindBody’s prospectus filed with the U.S. Securities and Exchange Commission, it reported $70 million in revenue for the year ended Dec. 31, up 44 percent from $48.7 million in 2013. Its net loss last year was $24.6 million, compared with a net loss of $16.25 million the year earlier.
For the first quarter ending March 31, revenue was $22.26 million, up 42 percent from $15.65 million in the same period a year ago, and its net loss was $7.86 million, compared with $4.84 million.
The company employs about 900 people in San Luis Obispo, plus 200 more in New York; the United Kingdom; and Sydney, Australia, and has room to grow to about 1,100 employees locally with its recent expansion, Stollmeyer has said.
Before Friday’s public offering, MindBody had raised slightly more than $100 million to help fuel its growth through the years, including $35 million from investors in 2012 and an additional $50 million in 2014.
Stollmeyer declined to comment on the IPO on Friday, noting that he is bound by securities regulations from discussing the company for 25 days.
According to its IPO prospectus, MindBody stated that it intended to use the net proceeds from its offering “for general corporate purposes, including working capital, operating expenses and capital expenditures.” In addition, it said, “we may use a portion of the net proceeds to acquire businesses, products, services or technologies. However, we do not have agreements or commitments for any material acquisitions at this time.”
Zacks Investment Research noted Thursday that although the market for management software solutions for the wellness business is slated to grow 17 percent between now and 2018, it is unclear if MindBody will be able to take advantage of that.
“If the company can fix its profitability issues and tap into the substantial growth of its industry over the next few years, this company’s stock will definitely be one to watch for investors,” Zacks said.
MindBody’s trading performance Friday also may be a bellwether for the upcoming IPOs of other SaaS companies, said Smith, of Renaissance Capital. These include Appfolio, an online property management software firm based in Goleta, and Xactly Corp. of San Jose, a cloud-based platform that ties compensation to employee performance.
“These companies can be volatile because no one is sure when they’ll start earning money, how much they’ll earn and how to model the present value of future cash flows (stock price),” Smith said.
By contrast, “we saw huge returns” when Fitbit went public Thursday on the New York Stock Exchange, but it was already a profitable company, Smith said. Fitbit’s stock bounced almost 50 percent. Its IPO was priced at $20 a share and ended its first trading day at $29.68.