Yext began trading on the New York Stock Exchange (NYSE) Thursday after announcing its initial public offering (IPO) of 10,500,000 shares of common stock. The stock was priced at $11 per share, $1 higher than projected, but opened at $14, according to one report.
The company began trading shares under the symbol YEXT. The offering is expected to close on April 19.
Calling it "the rise of structured knowledge," Yext CEO Howard Lerman believes the industry is in the midst of a major platform shift helping to power the company's business. "Search is no longer about 10 blue links on a page," Lerman stated. "Today’s users get intelligent, structured and direct answers powered by deep knowledge."
Staying profitable after an IPO becomes even more challenging. Gone are the days of never-ending concept Internet IPOs, said Peter Friedman, CEO of LiveWorld and former Apple executive. To go through an IPO, the company must show growth and a real business model, meaning path to profit.
Companies must remain mindful of the timing and in a positive cycle. The market sometimes will forget and forgive past failures, maybe let one or two through the IPO process based on hype, and then shut everyone else out, Friedman said. "This is also why Snapchat keeps getting hammered and the stock hasn't traded above its high on day 2," he said.
In its IPO perspective filing with the SEC, Yext details the company rapid growth, but one of the more interesting statements in the report points to its success depending, in part, on the Internet remaining "fragmented." Accessing the data will require an intermediary to connect specific information about physical business locations.
Yext, which supports small- and medium-size businesses, offers tools to sync its clients' information to more than 100 services, including Apple Maps, Bing, Cortana, Facebook, Google, Google Maps, Instagram, Siri and Yelp.
Some think that's not enough to remain successful as a public company.
Kevin Lee, executive chairman of Didit, believes Yext has done a great job supporting the medium-size business, but to "gain profitable revenue, it needs to figure out how to go after the smaller half of the SMB market or add-on supplementary services at a higher fee to existing customers."
Lee said managing the expectations of the major stock analysts is a big strategic challenge, which makes growth the company's biggest operational challenge, even more than profitability in the beginning.
"Organic growth at the level the street expects is feasible, but I’m betting there will be several merger and acquisitions by Yext over the next year. They may already have some deals in the pipeline and wanted to make sure that stock only or stock-cash deals are feasible. (Stock is a currency in M&A.)"
Yext also works with large enterprise businesses like Marriott, McDonalds, Arby's, T-Mobile, and others. In its S1 filing the company states "revenue from direct sales to small businesses represented less than 20% of our total revenue in the fiscal years ended January 31, 2016 and 2017."
Morgan Stanley, J.P. Morgan and RBC Capital Markets led the underwriting for the offering. Pacific Crest Securities, a division of KeyBanc Capital Markets, and Piper Jaffray are acting as co-managers.
Yext granted the underwriters a 30-day option to purchase up to an additional 1,575,000 shares of common stock to cover over-allotments, if any, according to the announcement.