Written by Norman Isaac Mwambazi

GitLab IPO: 5 things to know about GitLab IPO that could push the company’s value to $10 billion

GitLab, a software company without a physical location, filed S-1 forms to the Securities and Exchange Commission nearly a month …

GitLab, a software company without a physical location, filed S-1 forms to the Securities and Exchange Commission nearly a month ago. The company stated its intention to offer 8.4 million shares, after which it will start trading on the tech-heavy Nasdaq Stock Exchange on Thursday, October 14, 2021, under the ticker symbol GTLB.

The company expects to raise over $580.98 million from its IPO, with each share going for between $66- $69, which will make GitLab’s market value $9.87 billion. GitLab raised this expected pricing for each share from between $55 – $60 last week.

GitLab designs the software platform called “DevOps” that allows companies’ IT, security, operations, development, and business teams to work on the same platform simultaneously. Among the underwriters of GitLab’s IPO are Big Banks Goldman Sachs (ticker: GS), J.P. Morgan (ticker: JPM) and UBS Investment Bank (ticker: USB), as well as investment companies like B. of A. Securities and RBC Capital Markets. After the IPO, over 143 million shares are expected to be outstanding.

Here are five things to know about GitLab ahead of its IPO

Competition

GitLab’s filing to SEC listed Atlassian Corporation (ticker: TEAM) as a competitor. Atlassian also makes software products that allow developers and product managers to work on a common platform, like Jira and Trello. However, GitLab’s biggest competitor is Microsoft Corp.’s (ticker: MSFT) owned GitHub Inc. Microsoft acquired the largest source code host in 2018 for $7.5 billion, and this is could be why GitLab opted for Alphabet Inc.’s (ticker: GOOG. GOOGL) Google Cloud and Amazon.com Inc.’s (ticker: AMZN) Amazon Web Services (AWS) as hosts of its platform and providers of cloud computing services, sidestepping Microsoft’s Microsoft Azure.

According to data from Gartner Inc., a tech research and consulting company, GitLab’s market for DevOps collaborative platform is about $40 billion, and it believes it can close this year with a market of $43 billion. By the end of 2024, GitLab expects its market to have risen to $55 billion, banking on its current infrastructure software market of $328 billion that it expects to increase to $458 billion by the end of 2024.

GitLab’s documents also show that the company has registered a steady increase in Annual Recurring Revenue (ARR), with its base customers ($5,000 and above) increasing from 2,745 at the end of January this year to 3,632 by July 31, 2021. This is more than double the number the company had on its books by the end of January 2020, which was 1,662. AAR is a Software-as-a-Service (SaaS) metric used to measure the revenue a company expects from customer subscriptions for its products and services.

Apart from base customers, GitLab also said that AAR customers with $100,000 or more subscription packages grew from 219 by the end of July 2020 to 383 by the end of July 2021. It ended the same period with its $1 million ARR customers growing from 15 to 27.

They were the kings of remote work before COVID-19

Before COVID-19 struck the globe at the beginning of last year, forcing millions of companies to enforce working-from-home mandates, GitLab was already doing that with all 1,350 of their employees- in more than 65 countries- working remotely. With a 100% remote workforce, the company believes it was the largest “work-from-home” company in the world before the pandemic, so much so that the company lists “Address Not Applicable” in the section where it has to provide its headquarters or physical address.

GitLab co-founder Dmitriy Zaporozhets conceived the idea of the company from his house in Ukraine while Sytse Sijbrandi, the other co-founder, founded the company in his house in the Netherlands before the two decided to incorporate the company in 2014. Sijbrandi is the current Chief Executive Officer of GitLab.

As millions of companies and employees across the globe adjusted to the “new normal” of working from home for over a year, it was already the standard way of life at GitLab. This allowed it to help other companies transition to remote work, using its workforce spread around the world.

However, since technologies and access to the internet and other resources vary from country to country, the company sometimes struggles with providing the same level of service, tools, reliability, and security in certain countries, something the company has listed in its risk disclosure in its SEC filing.

GitLab is not about the “We are a family” business

does not purport to follow the “We are a family” values in its business model. The company makes it clear that its business is based on a more traditional way of operating.

In his letter to investors, GitLab CEO Sijbrandi said that although some companies prefer calling themselves a family of sorts, they (GitLab) do not hold that perspective, adding that the end goal is the satisfactory results for their clients, and not the relationship.

“We are clear about accountability and hold people to a clearly articulated standard. When people do not perform, we try to help them improve. If they still can’t meet expectations, we let them go,” Sijbrandi said in the letter.

Lower-tier services have been dropped

Previously, GitLab had five packages: Free, Starter, Bronze, Premium, and Ultimate. As of July 31, 2021, the starter and bronze packages, which collectively contributed 11% of GitLab’s revenue in the first half of the 2021 fiscal year that ended on July 31 (H1 FY2021), have been discontinued, and these users have been advised to either choose from the remaining three packages or stop using GitLab altogether. The company’s premium package goes for $19 a month, and the ultimate package goes for $99.

As reflected in its filing to SEC, the company’s finances show that it made sales of $152.2 million and loss of $192.2 million in last year, higher than what it made in the prior year ($81.2 million revenue, $130.7 million loss). In H1 FY2021, GitLab reported sales revenue of $108.1 million and a loss of $68.1 million- higher than the figures reported in the same half last year ($63.9 million revenue, $43.5 million loss).

Shares issued carry no voting power

All the 8.4 million shares GitLab is issuing for its IPO are Class A, which means they carry only one vote. After the IPO, owners of the company’s Class B shares will hold 99.1% of the voting power in the company.

Class B shareholders include CEO Sijbrandi with 16.7% of voting power, Khosla Ventures will have 14.3%, Iconiq Strategic Partners 11.7%, August Capital 11.3%, and GV 2017 will have 6.7% of the voting power.