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Whether you are a long-term value investor, experienced tech investor, or a yolo-ing meme stock speculator, you might find some use for a stock like ThoughtSpot in your portfolio. They haven’t yet gone public, but that doesn’t mean that you can’t start researching the company now.
If you are considering investing in this tech company, here’s some information that might help you understand how to evaluate this investment opportunity.Get started with Wealthsimple Trade. Sign up today and start building your portfolio.
What is ThoughtSpot?
Founded in 2012, ThoughtSpot offers enterprise software systems that allow companies to perform searches on vast, complex data sets in an intuitive way. ThoughtSpot’s technology is driven by artificial intelligence, or AI, and helps customers find “hidden knowledge” within their datasets.
ThoughtSpot helps non-technical employees search data in the same way that they’d perform a search without complicated query language. Multiple integrations serve up data analytics to internal users via apps, static reports, and other user-friendly modes.
Since the company rolled out the software-as-a-service or saas-version of their enterprise software, deployment has only become quicker and easier. Connections to various data warehouses, like Snowflake and Amazon Redshift, are available and can be up and searched in just a few minutes. Typically, there’s no data migration or remapping of any data fields needed.
ThoughtSpot counts several large, international companies like Walmart, De Beers, Hulu, and Daimler AG as customers.
ThoughtSpot reported revenues of $100 million in 2019. As of September, 2020, CEO Sudheesh Nair disclosed that the company experienced an 88% increase in its fiscal first quarter compared to the same quarter last year.
What is ThoughtSpot’s current market cap?
ThoughtSpot has not yet gone public, so there is no official market cap data available on the company. However, in the absence of this information, the next best metric is a company’s valuation.
A private company’s valuation (which is the preferred stock price multiplied by the company’s fully diluted share) can be based on the most recent round of fundraising. It’s a price that can form the basis of the resulting market cap from the IPO event.
ThoughtSpot first raised $10 million back in 2012 as a startup. So far, the company has raised $554 million in all, bringing the latest valuation to $1.95 billion. As ThoughtSpot gets closer to going public, it may disclose how much money it intends to raise from its IPO along with the number of shares that will be available to the general public. This information can give investors an idea of the resulting market cap when the first day of public trading ends.
Another way to gauge a company’s value is to look at companies in the same space. If a comparable company is publicly traded, you can use that information to make some assumptions about a similar, private company. If a similar company has recently raised funds or been acquired, you can use this information to estimate the value of the company you are evaluating for investment purposes.
In this case, you might look at Salesforce.com’s recent acquisition of Tableau, another data analytics company, for $15.7 billion. Tableau reported $1.2 billion in revenue for 2018. As of May, 2021, Tableau generated $394 million in revenue for Salesforce in its first fiscal quarter, up 38% from a year ago.
Why are people interested in buying ThoughtSpot shares?
Simply put, investors believe in the technology that ThoughtSpot has developed. This technology isn’t theoretical or abstract—it’s being used by large companies all over the world. In a sense, the tech has been proven and in use for quite some time.
This gives investors confidence that the company could continue to capture market share for years to come. It doesn’t hurt that a major competitor, Tableau, was acquired at a price point that signifies promising possibilities for similar companies.
ThoughtSpot has technology, customers, and a track record of successful implementations that make it look and feel like an established tech company. It’s an attractive combination of start-up and stability that investors look for when searching for the best stocks to put in their portfolios. Of course, only time will tell how the company and the stock will perform, but so far the indicators seem promising.
When is the ThoughtSpot IPO taking place?
ThoughSpot has not yet set a date for an IPO or declared that it’s filed any paperwork with the regulators that would approve the offering. But there’s been speculation about an IPO event for some time, and some industry analysts are confident that it’s imminent. It would be reasonable to expect this IPO to happen sometime in 2021.
If you’d like to monitor how close ThoughSpot is to an IPO event, here’s an example of events that usually take place before an IPO. You can watch out for announcements from them when any of these steps are complete:
An investment bank is chosen
The investment bank is responsible for structuring the IPO and getting commitments from buyers before opening day (when stocks are officially for sale on an exchange). These buyers could be institutional investors (like pension funds or insurance companies) or high-net-worth individuals.
Appropriate documents are filed
Before going public, a company must file an IPO prospectus, or S-1 prospectus, with the Securities and Exchange Commission (SEC). This information contains financial data and an overview of risk factors investors should consider before buying shares of the company.
The “roadshow” begins
In this phase, company management meets with prospective investors to “pitch” the company. Typically, the company’s CFO will be present and field questions from buyers who will likely commit to buying millions of dollars worth of shares before opening day.
A price and number of share are set
The night before the IPO, the investment bank and company executives will have a final meeting to set the IPO price and determine how many shares they will make available. By opening day, the general public will know the share price and the number of shares available for purchase on the public exchange.
So far, none of this has happened with ThoughtSpot. If you want to stay on top of this IPO, watch for any announcements about the S-1 filing. As a rule of thumb, companies are pretty serious at this point and tend to go public 1 to 2 months after this filing.
How can I buy shares of ThoughtSpot?
As you would with any investment, read the company prospectus to understand its business model, risks, and financial projections before investing. Since there are plenty of companies going public, it’s a good idea to familiarize yourself with some standard terms associated with IPO events:
Common stock: Shares of a company’s stock that allow shareholders to vote on company policies and receive any declared dividends from the company. During an IPO, common stock is available for purchase.
Issue price (or offer price): The price for shares of common stock available to investors before the stock is available on a public exchange.
Lot size: The smallest number of shares you can bid on during the IPO.
Preliminary prospectus: A disclosure document for public consumption. It outlines information about the business, business model, historical finances, risks, and opportunities.
Price band: Pricing for shares sold to different categories of investors i.e., institutional investors versus retail investors.
If you are comfortable with the pricing and feel like the information disclosed aligns with your investing strategy, the steps to invest in the company on opening day are straightforward:
Find a brokerage firm. Online is ideal. Your account can be opened and funded in just a few days once your personal information is verified.
Place an order for the stock according to your investment objectives: market, limit, stop order or buy stop order are common orders used to buy shares
Wait for confirmation that your order has been received and completed
Once you’ve placed your order and you are an official investor in the company, be sure to check in on your investment from time to time. Make sure the company’s core principles and operating philosophies remain in alignment with your personal convictions and financial goals.
If so, you can aim to increase your position in the company as time passes. If not, you can always sell your shares as needed.
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