Tintri IPO aims at lower share price

The Tintri IPO remains a go for now, but the flash vendor now expects less of a financial windfall than originally anticipated.

The vendor’s long-awaited initial public offering (IPO) of stock had been scheduled to commence Thursday morning, but Tintri abruptly postponed it when it appeared shares would fail to fetch the target price. Tintri originally planned to sell 8.7 million shares of common stock and generate approximately $109 million, based on a share price ranging from $10.50 to $12.50.

Tintri shares were set to be listed on the Nasdaq Global Market under ticker symbol TNTR. Instead, Tintri’s IPO registration with the U.S. Securities and Exchange Commission (SEC) was revised to 8.5 million shares at a price range of $7 to $8 a share. No date has been set for the delayed IPO. Based on the midpoint of $7.50, Tintri estimates proceeds could approach $63 million, presuming underwriters fully exercise the option to purchase an additional 1.275 million shares.

The new net proceeds represent a 42% drop from Tintri’s original target. The delay comes amid tightening flash supplies and consolidation in the all-flash storage market. The Tintri IPO bid faced the same challenge as other storage startups that have gone public in recent years, notably hyper-converged pioneer Nutanix and all-flash rival Pure Storage. Both of those vendors saw significant revenue growth prior to hitting the public board in 2016, although they also have absorbed millions of dollars in recurring losses related to customer acquisition and other costs.

Pure Storage projects that it will top $1 billion this year en route to its first profitable quarter. Based on its recent earnings reports, Nutanix is projected to be about three years away from turning a profit.

Tintri storage sales grow, but so do losses

Tintri has faced mounting financial losses each year since its inception in 2008. With no apparent path to profitability, going public or getting acquired appear to be the most viable paths to ensuring it survives long term.

As is often the case with startups, Tintri has sustained significant operating losses and negative cash flow. It posted a combined financial loss of $276.5 million between 2015 and 2016. Since its inception, Tintri’s accumulated deficit has reached $376 million. Those financials likely put a damper on investors’ enthusiasm for the Tintri IPO. We’ll soon learn whether Tintri’s revised pricing is enough to rekindle their interest.

Tintri started selling its flagship VMstore arrays as a hybrid product in 2011 and added an all-flash VMstore in 2015. Its storage is tightly integrated with VMware. Of late, Tintri has tried to downplay its roots as a hardware array vendor by repositioning VMstore as an internal platform for building private enterprise clouds to deliver software-based IT services. According to its SEC filings, sales of standalone software licenses accounted for 17% of Tintri’s product revenue in 2017.

The vendor claims to have 1,338 customers in the automotive, education, financial services, health care, manufacturing and technology sectors. Revenue growth has been trending in the right direction, moving from $50 million in 2015 to $86 million in 2016 and $125 million this year, but hasn’t been able to outpace net income-related expenses.

To date, Tintri has covered expenses mostly with $260 million in private equity raised in five separate rounds. After nearly nine years of financing, venture firms have turned off the spigot, prompting Tintri to try the public arena to raise operating capital.

The suddenness of the Tintri IPO decision is reminiscent of what SAN vendor EqualLogic did prior to its planned IPO in November 2007. The company pulled its IPO a day before listing after accepting a takeover bid from Dell. Engenio Information Technologies also had second thoughts about going public the day before its IPO was due to launch in 2004. Engenio was the storage division of LSI Corp. (now part of Avago Technologies). It never did go public, and was acquired in 2011 by NetApp. NetApp’s CEO at the time, Tom Georgens, was Engenio’s CEO at the time of its failed IPO attempt.