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Appfolio has successful IPO; stock closes Monday at $13.70

By   /   Friday, June 26th, 2015  /   Comments Off on Appfolio has successful IPO; stock closes Monday at $13.70

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Robert Greifeld, Nasdaq CEO, left, and Brian Donahoo, AppFolio CEO.

Nasdaq CEO Robert Greifeld , left, and Appfolio CEO Brian Donahoo on June 26.

Goleta-based Appfolio, which makes property management software for small- to medium-sized real estate managers, held its initial public offering Friday and the stock ended that day up 17.3 percent at $14.08. Appfolio stock dropped slightly on Monday, closing down 2.70 percent at $13.70.

Appfolio offered 6.2 million shares of Class A common stock for $12 each, which will raise about $71.4 million for the company. The stock started trading at $12.15 at about 8:15 a.m. Friday morning, and quickly went up. The stock peaked at a price of $14.79 at 9:40 a.m., and later rebounded to as high as $14.65.

Friday was a positive first day on the Nasdaq for Appfolio, which intends to use the money for marketing purposes, product research and development and to grow the company. Appfolio said in its most recent filing with the Securities and Exchange Commission today that it also planned to use some of the proceeds to pay back a $10 million debt from Wells Fargo Bank.

The Investment Group of Santa Barbara was a large early investor in Appfolio. The company said IGSB indicated purchasing up to $22 million in stock once the company went public. IGSB member Timothy Bliss has sat on Appfolio’s board since 2008. William Rauth from IGSB was also recently appointed to the board.

Entities affiliated with Investment Group of Santa Barbara have a minority investment in the parent company of Pacific Coast Business Times.

Appfolio officials could not be reached for comment Friday.

Like MindBody last week, Appfolio has a history of losing money and needs new capital to grow. Unlike Mindbody, Appfolio’s losses haven’t usually been as severe.

As of March 31, the company has lost $56.6 million in its history. Appfolio lost $7.3 million in 2013 and $8.6 million last year. The $3.6 million lost during the first quarter of this year was more than double the $1.2 million it lost over the same time last year.

Despite this, revenues have shot up over the past two years for Appfolio. The company increased revenues 108 percent between 2012 and 2013, increasing from $12.7 million to $26.5 million. Last year, Appfolio’s revenues again increased 80 percent to $47.7 million.

Quarterly revenue gains also remained strong in the first quarter of 2015. Quarterly revenue also increased 61 percent for Appfolio from $9.8 million in 2014 to $15.85 million during the same time this year. Analysts had mixed reviews about the stock.

Despite AppFolio’s history of losses, the company was able to significantly increase its revenue year over year,” investment research firm Zacks said.

The software solutions market for small-to-medium sized businesses is projected to double to $125 billion between now and 2016. If the company can improve on its profitability, it could be poised to be a valuable tech stock in the next few years.”

Don Dion, CEO of Florida-based DRD Investments, told investors to remain cautious about Appfolio.

The Appfolio IPO has many risks because of its limited operating history and history of losses and the dangers of security breaches,” Dion said.

We suggest caution, given lack of profitability,” and it could be overshadowed by other companies going public this week, Dion said.

 

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