Pure Storage IPO Range Shows Little Change in Year-Old Value

  • Flash maker's offering puts value at up to $3.33 billion
  • California startup seeks to raise as much as $450 million

Pure Storage Inc., the third-biggest seller of all-flash storage systems, is seeking a valuation in its initial public offering that almost matches what private investors said the company was worth 17 months ago.

The Mountain View, California-based company plans to offer 25 million shares of Class A stock for $16 to $18 apiece, as laid out in a regulatory filing Thursday. That would value the company at between $2.96 billion and $3.33 billion.

Pure Storage is part a growing crop of technology startups that have raised hundreds of million of dollars and garnered private valuations above $1 billion. It is also among the first to see whether it can achieve as lofty a valuation in the public market.

After a financing round led by T. Rowe Price Group, Pure Storage said in April 2014 that it fetched a valuation of $3 billion. Now, after nearly a year and a half of development and conducting business, that figure has increased only slightly at best.

‘Down Round’

Pure Storage’s IPO will serve as test over whether “the private market is intrinsically different from the public market, from a valuation perspective,” said Rett Wallace, chief executive officer at Triton Research, which analyzes Silicon Valley companies preparing an IPO.

“In the Valley, an emerging clever truism is that an IPO is the new down round,” he said. “With so few tech deals in the market, Pure Storage is set up to be the singular data point to support or debunk this idea.”

Pure Storage plans to raise as much as $450 million in the IPO, which would go toward expanding product development and for sales and marketing.

The company claimed 12 percent of the $1.3 billion market for solid-state array systems in 2014, which include those with flash technology that use chips rather than a spinning disk, according to Gartner Inc. EMC Corp. had the No. 1 spot, with 34 percent of the market, while International Business Machines Corp. had 18 percent.

Flash storage is more expensive than traditional hard-drive storage but is faster and can speed website and application response. The technology also can help customers save money on upkeep and electricity.

Sales for Pure Storage, which counts LinkedIn Corp. and Nielsen as customers, more than quadrupled to $174 million in the fiscal year ended Jan. 31. Net losses more than doubled to $183.2 million during the period. Pure Storage had more than 1,100 business customers as of July 31, up from more than 200 on Jan. 31, 2014.

After the IPO, holders of Class A stock will have about 1.5 percent of the company’s voting power. The rest will belong to Class B shareholders, which include executives and Pure Storage’s venture-capital investors, the prospectus shows. Pure Storage’s backers include Greylock Partners, Sutter Hill Ventures and Redpoint Ventures.

Morgan Stanley, Goldman Sachs Group Inc., Barclays Plc and Allen & Co. will manage the offering. Pure Storage, which plans to list on the New York Stock Exchange, will use the ticker symbol PSTG.

(An earlier version of this story corrected the spelling of Nielsen’s name.)

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