Cloud darling Hashicorp's IPO raises $1.22bn amid modest gains from a $80 start

Cloud software biz Hashicorp hit the markets this week with an initial public offering priced at $80 per share after which its stock enjoyed a modest rise as investors cracked open their wallets. The Nasdaq debut went ahead on Thursday, and the offer price valued the company at approximately $14bn. The 15.3 million shares of …

[cdegroot]

Bearish

We're 100% cloud native, and have zero need for pretty much most Hashicorp stuff because AWS, Azure, GCP all have that (and the number of companies that really need multi-cloud is small, much smaller than their total addressable market size dreams tell them).

Hashicorp was great when you needed something "cloudy" to run on prem, stuff like Vagrant was great fun (until Docker crashed that party) in development, Vault/Nomad/Consul are not something you should run if you can help it, leaving Terraform, which is indeed less awful and more useful than, say, CloudFormation. But it's hardly going to be the last word of "infra as code" (it is more "infra as HCL templates", for starters). Pulumi, AWS' CDK, and similar efforts (including Nix/Guix) are already pointing the way forward and all that Hashicorp can do is hope to hang on (Terraform is the only thing we use and more out of a "nobody got fired for choosing it" PoV than because we really like it).

Still, congrats to them on the IPO.

[ecofeco]

Who?

And what makes them different from everyone else?

[batfastad]

Mostly works, might be good when finished

The stuff from HashiCorp Inc mostly works for very specific use-cases. Perhaps it will all be good when its finished. I have no idea how their valuation translates to their actual products generating equivalent levels of revenue though. I get the feeling that most of their stack will be cast into irrelevence in a few years with whatever new devops tooling is excreted by some other tech bros.

Terraform is the de-facto cross-cloud management tool at the moment but in our experience you spend far more time on the abstraction from vendor to HCL and you're much better off admitting you're unlikely ever to be managing multiple vendors. Also the abstraction becomes unwieldy very quickly, with even just the management of a few VMs, networks and IPs quickly becoming a 10,000 line web of HCL structures (a broken-looking JSON). For most cases using the vendor's supported domain-specific language and tooling is a much better plan than a single repo of thousands of lines IMO.

[Anonymous Coward]

It is a popular misconception that a public offering is more successful if the newly-issued shares trade at much higher prices shortly after the offering. In fact such an outcome benefits the underwriters (usually large Wall Street banks) at the expense of the issuing company. In order to understand why this outcome is bad, one must understand how a public offering works: the underwriters are responsible for lining up institutional investors to subscribe to the offering, and in doing so they are able to gauge a likely offering price. Once that price is determined, the underwriters themselves guarantee the issuer that price, agreeing to purchase the issued shares themselves. Hence "underwriting". When the share price rises rapidly in initial trading, this means that the underwriters failed to gauge demand accurately and in the process obtained a large number of shares at a price much lower than they can sell them for on the open market. Those profits could and should have gone to the issuer in the form of a higher offering price; instead they end up in the underwriters' pockets.

One might imagine that this is merely an unusual outcome that compensates the underwriters for all the times they end up stuck with shares they can't sell. However, there are two factors to consider: first, that outcome is very unusual; typically the initial price is based on a conservative survey of demand for the shares, so the price is rarely set too high; second, the underwriters also keep a percentage of the total money raised for themselves regardless of where trading goes after the offering. It is this percentage that compensates the underwriters for the risk they take, just as a premium compensates an insurer.

The truth is that underpriced IPOs are a scandalous breach of fiduciary responsibility. The ideal outcome for the issuer is that the shares trade in a range around 10% below the issue price before rising slowly back to it a year or so later. That minimises the profit given up to underwriters and their institutional investor customers without encouraging them to find other ways to get their pound of flesh or discouraging them from participating in subsequent transactions, and leaves the door open to follow-on rights issues and insider share sales at favourable prices. So in fact Hashicorp's IPO was quite successful; they came pretty close to the ideal outcome. Given the limited appetite at $85 I suspect they couldn't have gotten much more than they did for the chunk of their company they sold.