Domo stock soars on opening day then takes plunge below IPO price

By John Rogers

Domo Inc., the American Fork-based developer of an operating system which helps business executive run their firms by combining people and data, has gone public — to mostly mixed reviews. The company’s stock began trading on the Nasdaq Global Market under the ticker symbol “DOMO” on June 29. The initial public offering was priced at $21 per share and an opening-day pop sent the price to near $27, although shares were trading under $19 late last week.

Founded by Josh James in 2010, Domo was valued at over $2 billion at one point last year by financial analysts, according to Forbes, making the modest approximately $202.6 million the company estimates it raised with its IPO a disappointment to the investment community. Industry experts blamed the reduced expectations partially on slower growth, but say they are mostly the results of continued big losses reported by the business, Forbes said. 

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Domo’s operating expenses amounted to 199 percent of its revenues in the first quarter of 2018, an improvement from 257 percent a year earlier, according to the company’s S-1 filing with the SEC. The first quarter losses were $45.5 million. In its filing, Domo warned that it will “incur losses for the foreseeable future.” 

Only Class B shares of Domo were offered in the IPO. James owns all of the Class A shares, representing 86 percent of the voting stock.

Domo offers a dashboard of a key financial business metrics and had about 1,500 business clients as of its April 20 IPO filing. Where Domo has historically said it is different is that many of its users are CEOs. James said recently that about 400 corporate bosses use the software. Domo’s cloud-based operating system lets CEOs manage their entire companies from their smartphones, the company said. 

James said that a large number of Domo’s customers have revenue of more than $1 billion — again nearly 400 — that account for half of the company’s revenue. Domo bills itself as the most mobile-friendly among similar software offerings, pulling in data from a range of sources to display information like inventory, sales and team targets on easily swiped digital cards. Domo collects data from various sources across organizations and subsequently stores, prepares and analyzes the information. 

According to the stock-tracking website Motley Fool, Domo’s competitors include Microsoft, which integrates collaboration and productivity software into its cloud services; Tableau, which offers data visualization and business analytics tools; and salesforce.com, which provides a wide range of cloud services for businesses.

James is not new to developing software giants. He started Omniture, took it public and sold it to Adobe for $1.8 billion. Adobe in turn rebranded Omniture as the Adobe Marketing Cloud. 

James told Forbes that the IPO was the most efficient step forward for his company. He said the doubts in the market have been “galvanizing” for employees. “Today’s been great, but it’s a financing event, a milestone. We needed to raise some capital and this seemed the most efficient way to do it. And we’re excited,” James told the magazine. “We’re hitting all the right metrics in terms of finally proving the enterprise. Now we have to go and execute.”

Morgan Stanley & Co. LLC, Allen & Co. LLC, Credit Suisse Securities (USA) LLC and UBS Securities LLC acted as the joint book-running managers for the offering, Domo said in a press release. Cowen and Co. LLC, JMP Securities LLC and William Blair & Co. LLC acted as co-managers for the offering.{/mprestriction}