Pure Storage (PSTG) Stock Slips in First Trading Day After IPO

Since launching its first product in May 2012, the Mountain View, Calif.-based company said it now has more than 1,100 customers.

Hatfield, who called CRN from the New York Stock Exchange where he and his team pressed the button to sound the buzzer that opened the day’s trading, said Pure Storage has a huge $24 billion market it needs to address.

“Since the company has been evaluated and more exposed to competitors, it [could] be acquired and give the potential buyer an edge in this fast-growing market”, said Context’s senior vice president of research and business development Alex Mesguich. Pure Storage had planned to offer 25 million shares at $16 to $18 a share, according to regulatory filings.

Pure Storage is trading on the NYSE under ticker symbol PSTG.

Several unicorns went public earlier this year at prices that valued the companies at less than their earlier private funding rounds, discouraging others from following.

Pure raised about $425 million in the offering. That’s the same number of years that it took Riverbed Networks to reach at least the $200 million mark.

The imminent IPO of Pure Storage could make the fledgling flash firm a prime target for acquisition, according to analyst Context. It’s already made $US159 million in the first half of this year, putting it on pace to hit almost $US300 million this year.

Reuters reported in April that Pure storage was preparing for an IPO.

Investors shouldn’t expect a profit any time soon, the prospectus warned.

“We’re not experts on the valuations of the business”.

Other risks: The company notes that it has grown rapidly, but might not be able to maintain or properly manage that growth. Over the past 12 months, it spent $112 million on R&D, more than triple what was spent the year before, and $176 million on sales and marketing, again more than triple the year before. “We anticipate that our operating costs and expenses will increase substantially for the foreseeable future”. And that’s a deliberate calculation by Pure Storage. Gartner ranked Pure Storage third in the flash storage market, behind EMC and IBM. The third quarter was the worst quarterly stock-market performance since 2011, and investors pulled a net $46 billion out of USA stock funds in July and August, according to Investment Company Institute. “We believe in that this market will tip to all-flash”.