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The US-based tech company that just went public in London

Alex Wilhelm
Boku, a United States-based carrier billing company, listed on the London Stock Exchange’s Alternative Investment Market (AIM) recently, selling £45 million in stock.

Boku, a United States-based carrier billing company, listed on the London Stock Exchange’s Alternative Investment Market (AIM) recently, selling £45 million in stock. Only about one-third of those shares were from the company, however, with the rest sourced from extant shareholders.

The flotation is interesting, given where Boku is based, how much it had previously raised and from whom and how much it is worth post-IPO.

The IPO conversation here in the Bay Area spirals around unicorns and their ability (or not) to meet their last private valuations. But that situation doesn’t apply to every company that will go public.

Let’s peek into the Boku offering to see what happened and what we might learn from it.

The flotation

Boku sold 76.2 million shares of its equity in its debut at 59 pence apiece, bringing in just under £45 million. The income was split roughly by one-third for the company, and around two-thirds for what Interactive Investor called “existing shareholders.”

Shares of Boku closed the day at 73.50 pence, up 24.6 percent. That’s a very healthy first-day pop. The company’s £125 million IPO valuation (post-money) is now worth, including a currency conversion, $206 million, give or take.

And now you can see why this is all quite interesting. What sort of company goes public when it is worth just a few hundred million? Well, as it turns out, the AIM is a place built for smaller companies to float on — not everything has to be the Big Board.

Last year, I caught up with James Clark, who works for the London Stock Exchange, to better understand why smaller companies might want to list on the AIM. Here’s what he said:

AIM, London Stock Exchange’s market for smaller, high growth companies was created to provide the optimum conditions for small and mid cap growth companies—i.e. valuations in the tens to hundreds of millions of pounds.

Because of the scale of the US exchanges, companies at this sort of valuation can struggle to cut through the noise. When they can even get onto market, we have found they can struggle to attract top tier investors, may have to offer deep discounts on their issue price, and run the very real risk of becoming so-called “orphan stocks” lacking adequate coverage from analysts.

Smaller, high-growth companies going public? Let’s look at Boku’s book to figure out how it fits the mold.

Boku by the numbers

What initially snagged our attention in all of this was the combination of San Francisco headquarters, Silicon Valley money and London IPO.

What would bring a company into that particular milieu? As it turns out, a company that is nearing a decade of life that has raised quite a lot of capital and just found new wind.

Boku, founded in 2008, according to Crunchbase, has raised nearly $90 million across rounds stretching back to 2008. Benchmark, Index and Khosla hopped in back in 2009, a16z in 2010 and New Enterprise Associates led the company’s $35 million Series D in 2012. The firm tacked on $13.75 million in late 2016.

From its filings, here's what you need to know about the firm’s recent growth. Foregoing its TPV (payment equivalent of GMV), here’s its revenue for the last three full years for context:

  • 2014 full-year revenue: $14.2 million.
  • 2015 full-year revenue: $15.2 million.
  • 2016 full-year revenue: $14.4 million.

Here are the firm’s last two half-year results:

  • 2016 H1 revenue: $8.4 million.
  • 2017 H1 revenue: $10.2 million.

And, the “Underlying EBIDTA” results from the same two periods:

  • Underlying EBIDTA H1 2016: -$7.2 million.
  • Underlying EBIDTA H1 2017: -$2.8 million.

What does all that mean? That after a few years of uneven results, the firm has a solid growth number in place for the first half of 2017, along with improving profitability.

Not a bad time to go public, really.

(And if you are worried that the firm could return to the negative growth that it saw before, bear in mind that this is a smaller IPO. The stakes here are smaller than when a unicorn goes public while keeping its horn.)

Smaller IPOs: so what?

Before we got underway, we stated that Boku was interesting for a few reasons, including “where Boku is based, how much it has raised and from whom and how much it is worth post-IPO.”

We can deal with that mix head-on now, and in the process, answer our just-stated, final question.

What is interesting about Boku’s headquarters is that it’s a full ocean away from its trading market. Seeing an American tech company go public on a British exchange isn’t unheard of. But I can’t recall another venture-backed, U.S.-based company going public in a similar fashion (biotech aside).

Which brings us to Boku’s fundraising. Its list of backers is a power list of Silicon Valley’s venture class, and London’s AIM helped provide liquidity to some of America’s well-known money kids.

Finally, the firm’s value at just over $200 million represents a smallish exit for a company that has raised around $90 million. But, notably, it is an exit of sorts, and one that doesn’t involve crushing the firm into a purported open niche inside a corporate giant.

Crunchbase News reached out to the London Stock Exchange concerning the Boku IPO in particular, to which the group responded:

This IPO again highlights that LSE, particularly via our growth exchange AIM, has a track record of offering small and micro cap tech companies access to high quality capital at lower cost and reduced regulatory burden relative to US public markets. It also shows VC shareholders can diversify funding for portfolio companies and often achieve partial exit through a London IPO.

Fair enough, really, given what Boku pulled off.

We don’t hear about many small or mid-cap tech IPOs here in the States, at least not at the moment. Perhaps, however, we’ll see a few more like Boku?

In that vein, we also asked about the pacing of U.S.-based companies listing across the pond. To which the LSE responded with data that implies that we’re a bit behind on the trend:

Crucially, history shows that London blue chip institutional investors are comfortable with companies with much smaller annual revenue (sub $10 million in some cases) and market caps (most AIM IPOs have market caps in the $50 million-$300 million range) than typically seen in US IPOs.

We have had about 20 North American companies from various sectors list in London this year with market caps ranging from c.$10 million up to $3 billion and have seen a significant increase in interest in the tech sector that we now have a number of US tech deals in our IPO.

We’ll be on the lookout for the next Boku. More when it lists.