Klaviyo Pops 9% in IPO After Pricing at $30, Above Expected Range

The revival in IPOs boosted marketing software company Klaviyo’s KVYO stock market debut. The firm priced 19.2 million shares at $30 on Monday, and trading opened at $36.75 on Tuesday—a jump of roughly 23%. The stock closed at $32.76 for a 9% gain over the course of its first trading day.

Monday’s $30 price tag was already higher than expected. Earlier that day, the company raised its target from a range of $25-$27 to $27-$29.

With the IPO pricing above the upper end of its range, investors valued Klaviyo at roughly $9.2 billion. That’s only a little less than the startup’s most recent private funding round in 2022, which valued it at $9.5 billion, according to PitchBook.

“Klaviyo is a best-in-class marketing tech company with incredible revenue growth,” says James Ulan, lead emerging technology analyst at PitchBook. He believes the firm has very strong financials compared with its software-as-a-service competitors like Braze BRZE.

Klaviyo Benefits From IPO Market Momentum

The price adjustment comes in the wake of last week’s blockbuster IPO from chip designer Arm Holdings ARM, which saw its stock pop 25% in its first hours of trading.

Investors also gave a warm welcome to grocery delivery app Instacart CART, which jumped Monday after pricing $30 per share.

In addition, software stocks have been on a tear in 2023. The Morningstar US Software Application Index has risen 38.9% so far this year, while the overall market as measured by the Morningstar US Market Index is up 16.9%.

Klaviyo Profitability a Plus

Klaviyo is a marketing SaaS platform for e-commerce. It allows brands to create advertising campaigns using consumer data. The firm notched $472 million in revenue in the 2022 calendar year, representing 63% growth over the previous period. The company booked a net loss of $49 million for that year but turned a $15 million profit on $320 million in revenue in the six months ending in June. As a new IPO landscape takes shape in a world of rising borrowing costs, such profitability could prove important.

“With capital markets closed for nearly two years, unprofitable companies have been forced to fund operations by spending cash balances,” Goldman Sachs analysts led by David Kostin wrote in a note to clients on Monday. “This experience has driven investors to prefer stocks with high levels of current profitability.”

Of course, profits never come with a guarantee. In its registration statement with the Securities and Exchange Commission, Klaviyo warned that it may not be able to sustain its rapid revenue growth as its business matures and that it is “not certain” whether the firm will continue to be profitable.

Goldman Sachs, Morgan Stanley, and Citigroup are the main underwriters on the listing. Klaviyo does not expect to pay a dividend.