Upwork are keeping their Nasdaq IPO on the down low by filing their IPO under a ‘confidential filing’. This is a route that many start-ups take to gauge the interest of investors and begin the process of listing without as much public scrutiny.
Upwork is another successful tech company and one of the largest global skilled freelancer marketplaces.
A freelancer marketplace connects freelancers to businesses and after a merger in 2015, Elance and oDesk became Upwork which now operates in 180 countries.
Why watch them? In addition to operating in 180 countries, they now have 375,000 freelancers and 475,000 businesses using their platform. In fact, in 2017, 10% of their revenue came from a single business on the platform. In the financial year that ended in June 2018, some 2 million projects were created on their platform engaging finance specialists, developers and designers, marketing specialists and writers of different kinds.
Key numbers:
Sales are currently growing at around 20 percent.
In the 12 months preceding June 2018, Upwork made $228 million in revenue on Gross Services Value of $1.56 billion. Note: Gross Services Value (GSV) is the total amount of service work ‘purchased’ on the Upwork platform. Upwork charges freelancers a service fee on the total amount of the bill they get paid from the businesses they work for on the Upwork platform. You can read more about Upwork’s business and revenue model here.
Upwork however operates at a net loss, most recently posting $7.1 million for the six months preceding June 2018.
Upwork said that part of the IPO proceeds (money they raise from their IPO) will be used to pay back $19 million of a loan made by Silicon Valley Bank.
Key Considerations:
There is some controversy about non-traditional employment. Platforms like Upwork are great at connecting freelancers and businesses however the concern is around fewer employment rights and benefits for freelancers. Although they aren’t a traditional employee, the nature of their work is often more closely defined as an employee than a business owner. The second controversial point is that the fierce competition among marketplaces has led to lower wages overall as businesses have more choice and often freelancers will compete on price.
The offer:
According to Pitchbook, Upwork itself has only raised around $30 million since the company started in 2003.
Investors in the company include DAG Ventures, Benchmark Capital, T. Rowe Price, FirstMark Capital, Jackson Square Ventures, Globespan Capital Partners and Stripes Group.
Upwork now plan to raise $135 million by offering 12.3 million shares 44% of which are insider (shares of senior directors of the company) at a price range of $10 to $12. Insiders intend to purchase up to $27 million of the IPO (20% of the deal).
At the midpoint of this proposed pricing range, Upwork would command a fully diluted market value of $1.3 billion.
Note: Fully diluted market value means that all shares have been fully diluted. When shares are fully diluted it means that any stock options or bonds are exercised (issued). This means that the number of shares increases and therefore reduces the dollars earned per share, otherwise known as diluted Earnings Per Share (EPS). You can read more about EPS here.
Will Upwork live up to their name and work their share price up for investors? We’ll soon find out on their first day trading in October 2018.
Please know, the value of investments can go up as well as down and you may receive back less than your original investment, meaning, when investing your capital is at risk.
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