Glendale's blue-collar software firm ServiceTitan saw its shares close up 42% after debuting Thursday on the Nasdaq in its initial public offering.
The provider of business management software for plumbers and other contractors priced its IPO of 8.8 million shares at $71, raising gross proceeds of $625 million. The shares, which had hit $105 in early afternoon trading, closed at $101. The company has the potential to raise more capital if underwriters exercise a 30-day option to sell an additional 1.32 million shares.
The shares, which trade under the ticker symbol TTAN, were initially priced at $52 to $57 before being upped earlier this week to a range of $65 to $67, indicating demand had picked up for the offering. At its $71 debut price, the company had a market value of $6.42 billion, lower than the $7.6 billion valuation it had after a November 2022 funding round. However, with the surge in its stock price, the company's market cap hit $9.1 billion at the close of trading.
"I was a bit surprised. I don't think even the underwriters were expecting this," said Riley Mullin, an analyst with Renaissance Capital, who noted the closing price was almost double the low end of the IPO's first pricing range, making the company "richly valued."
He said ServiceTitan benefited from a big interest in software and tech stocks, including artificial intelligence, as well as investor excitement over the incoming Trump administration.
There have been only a handful of software IPOs this year, with ServiceTitan the largest since data management company Rubrik went public in April. However, there are signs the market is recovering after being battered by inflation and the Federal Reserve's interest rate hikes.
ServiceTitan counts about 8,000 contracting firms as customers, providing a soup-to-nuts software package that can manage booking appointments, generating estimates and processing invoices as well as payroll and dispatching workers. Clients range in size from family-owned contractors to large national franchises totaling more than 100,000 technicians. The firms pay a subscription fee for its services.
More than $300 million of the IPO's proceeds will go to retiring all of ServiceTitan's nonconvertible preferred stock, a type of stock that typically pays holders a consistent dividend but cannot be converted into common stock. The company, which wants to expand the number of trades and markets it serves, will use the remainder for general corporate purposes and possible acquisitions.
Read more: Even plumbers need software: How Glendale's ServiceTitan became a billion-dollar start-up
ServiceTitan was founded in 2007 by two college friends from Glendale, Ara Mahdessian, 39, and Vahe Kuzoyan, 41, whose fathers worked as contractors. They both moved to L.A. as young children in the 1980s — Mahdessian from Iran and Kuzoyan from Armenia.
At an opening bell ceremony, Kuzoyan, the company's president, called the trading debut "a very special day for ServiceTitan, but more importantly it's an incredible milestone for this very special industry."
The event also turned into a celebration of the founders' parents, who rang the opening bell. "Our parents came to this country with no language, no money, and it was through this industry they were able to achieve the American dream," Kuzoyan said.
ServiceTitan employed 2,870 workers as of July 31 at its Glendale headquarters and offices elsewhere in the U.S. and internationally. Competitors include BuildOps , Housecall Pro, Jobber and other companies that charge subscriptions for their web-based business management software.
The company previously raised about $1.4 billion from venture firms, including Iconiq Growth , Bessemer Venture Partners and Battery Ventures. The company had filed confidential paperwork for an $18-billion IPO in 2022, according to Business Insider, but didn’t proceed when the market froze up.
ServiceTitan reported revenue of $614 million in the fiscal year that ended Jan. 31, up nearly a third from a year earlier, and an operating loss of $195 million, 28% less than in fiscal 2023. It had about $147 million in cash and equivalents on hand as of Jan. 31 and was carrying $175 million in long-term net debt.
The company’s share structure will ensure that control remains with the co-founders. They are retaining all of ServiceTitan's Class B shares, which are entitled to 10 votes each when shareholders make decisions about the company's leadership.
Lead underwriters on the IPO are Goldman Sachs Group, Morgan Stanley, Wells Fargo and Citigroup.
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This story originally appeared in Los Angeles Times .
