Enterprise spend administration software program firm Coupa’s buyers are ringing the alarm a few attainable sale to personal fairness, involved that any such transaction within the present funding atmosphere might unreasonably restrict its worth.
That is one thing you don’t see daily. Final week, rumors surfaced that Vista Fairness Companions was interested by shopping for Coupa. As we speak, Coupa’s largest shareholder, HMI Capital, with 4.8% of the inventory, made a letter to the Coupa board public, stating that it could oppose any deal that it believed undervalued the corporate.
It pegged its worth at a minimal of $95 per share. Coupa’s share value hovered round $63 this afternoon, down practically 3%. Like many SaaS shares, Coupa’s worth has dropped precipitously in 2022, down 60% for the yr.
HMI is nervous that Coupa’s present worth doesn’t mirror what it believes shall be a profitable future as soon as it will get past immediately’s troubled valuation marketplace for software program corporations.
In contrast to the poison-pen letters we’re used to seeing from activist buyers, this one was stuffed with nothing however reward for the corporate (most likely as a result of its objectives had been very completely different):
As now we have conveyed to the Board and administration staff, we invested in Coupa primarily based on our perception that it is a superb enterprise. Its administration staff — most notably Chief Government Officer Rob Bernshteyn — has completed an distinctive job constructing the Firm from a startup to a transparent market chief, whereas establishing enterprise spend administration as its personal important class. Maybe most significantly, Coupa’s outlook for future development and long-term worth creation is shiny. As Mr. Bernshteyn himself said only some months in the past:
“Now near-term state of affairs apart, we’re proudly the clear chief in enterprise spend administration. Our whole addressable market is very large and under-penetrated and we’re excited as ever in our pursuit to revolutionize this market and ship buyer success like by no means seen earlier than.”
It’s our view that we converse for a lot of different shareholders once we say that we might be happy to personal Coupa for the foreseeable future and to wager on the staff to proceed to construct momentum and execute its confirmed technique.
It’s nearly odd to see an exterior investor praising an organization’s management, as most public investor remark is unfavorable. Right here we don’t see an investor begging administration to chop prices or change course. As a substitute, it’s reward and a perception in higher worth but to come back.
The sunny view of Coupa’s future conflicts with current public market sentiment in regards to the future worth of tech corporations. That prevailing viewpoint, crossed with enormous quantities of personal fairness dry powder, might have put PE buyers in a deal-making temper.
HMI is begging the Coupa crew to stay it out, or no less than demand greater than they in any other case would possibly accept. In fact, that is HMI speaking its personal e-book, however there could also be some substance to its argument. Let’s examine the mathematics — and a comp.
