SAP’s Qualtrics Files For IPO In US; Shares Gain

SAP’s Qualtrics International has filed for an initial public offering (IPO) in the US for up to $100 million. SAP shares rose less than 1% in Tuesday’s pre-market session after closing 3.9% higher yesterday.

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According to an SEC filing, Qualtrics, which was snapped up by SAP (SAP) for $8 billion two years ago, expects that the IPO will be priced between $20 and $24 per share. The offering price would value the company at $12 billion to $14.4 billion on a fully diluted basis.

Following the completion of the offering, Qualtrics will offer two classes of common stock outstanding: class A common stock and class B common stock. SAP America will own all 423,170,610 shares of class B common stock and will remain the controlling shareholder. Each share of class A common stock will be entitled to one vote and each share of class B common stock will be entitled to ten votes. The developer of customer-survey software plans to list the stock on the Nasdaq Global Select Market under the ticker symbol “XM”.

Additionally, Qualtrics disclosed that funds affiliated with Silver Lake Technology Management have agreed to buy $550 million worth of class A common stock via a concurrent private placement transaction. The transaction, which is expected to close immediately following the IPO, includes $225 million in stock at the IPO price and the rest at $21.64 per share.

Back in July, SAP had already announced its plan to take Qualtrics public in the US to help expand its footprint both within SAP’s customer base and beyond.

“SAP’s acquisition of Qualtrics has been a great success and has outperformed our expectations with 2019 cloud growth in excess of 40 percent, demonstrating very strong performance in the current setup,” SAP CEO Christian Klein commented in July. “We decided that an IPO would provide the greatest opportunity for Qualtrics to grow the experience management category, serve its customers, explore its own acquisition strategy and continue building the best talent. SAP will remain Qualtrics’ largest and most important go-to-market and research and development (R&D) partner.”

The software maker’s shares have gained 8.1% over the past month and are now trading 2.3% lower than at the start of the year. (See SAP stock analysis on TipRanks)

Citigroup’s Walter Pritchard last month cut the stock’s rating to Hold from Buy and reduced the price target to $134.54, as the analyst expects “muted” potential for sales growth until 2022.

Pritchard anticipates to see signs of margin expansion only after 2023 and therefore, he finds it hard to promote the attractiveness of the shares in light of near-term uncertainty.

The rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is divided between 4 Buy ratings and 7 Hold ratings. The average price target of $135.15 implies shares have room to advance 3.2% over the coming year.