Confluent rises 25% after raising $ 828 million in IPO

Confluent, the data analytics provider that emerged from LinkedIn in 2014, was up 25% on its Nasdaq debut on Thursday, giving the company a market capitalization of $ 11.4 billion.

In the offering, Confluent raised $ 828 million, selling 23 million shares at $ 36 each, above the projected range of $ 29 to $ 33. The stock, which trades under the ticker symbol “CFLT,” closed at $ 45.02.

Confluent software tracks the many events that take place within a company, be it a new sale, an order, an exchange, or a customer response, and filters those insights in real time into a company’s databases. As businesses have become more complex, with data living in multiple clouds and on local servers, the demand for Confluent’s so-called data transmission products has increased.

Revenue increased 58% last year to $ 236.8 million, according to the prospectus. However, research and development costs increased 81% and share-based compensation skyrocketed, resulting in a net loss of $ 229.8 million, up from $ 95 million in 2019.

Confluent is based on Apache Kafka, an open source technology that was created within LinkedIn in 2011 by Jay Kreps, Jun Rao, and Neha Narkhede. After using the technology internally for data streams, the trio created Confluent as an independent company in 2014 with an investment of approximately $ 500,000 from LinkedIn.

While Kafka remains a free open source product that can be managed as a service by Amazon, Microsoft, or Google, Confluent markets the software, offering its full capabilities and running it in any major cloud or in the physical data center of a company.

Kreps told CNBC’s “TechCheck” that cloud providers are partners rather than competitors.

“One of the reasons they like working with us is because we help connect all these new layers that are in the cloud with a lot of the data that exists in other clouds or on premises,” said Kreps. “Really linking that around a central nervous system is a huge problem that companies have to deal with.”

Confluent said in its prospectus that it is estimated that more than 70% of Fortune 500 companies have used Kafka. Its clients include Citigroup, Humana, Intel and Walmart, according to the Confluent website.

Confluent is the latest open source technology-based company to get big enough to go public. The MongoDB database platform debuted in 2017 and is now valued at $ 24 billion. Elastic, which markets open source tools for enterprise search, went public a year later and has a market capitalization of $ 13 billion. Databricks sells software based on Apache Spark, which helps companies clean up large volumes of data. The company was valued at $ 28 billion in a private financing round in February.

The model has not always worked for public investors. Cloudera, one of several companies that focused on Apache Hadoop’s data analytics framework, agreed to sell to private equity firms earlier this month in a $ 5.3 billion deal. Cloudera merged with rival Hortonworks in 2019 as both companies were burning cash and their shares plummeting.

Even after the merger, Cloudera continued to struggle, primarily because it was late to the cloud market, where Databricks has thrived.

As of Thursday’s close, Kreps owns a stake worth $ 1.3 billion. Venture firm Benchmark is the largest investor with stocks worth close to $ 1.6 billion, followed by Index Ventures, whose stake is valued at around $ 1.3 billion.

– CNBC’s Jordan Novet contributed to this report

LOOK: Confluent Co-Founder and CEO Jay Kreps at IPO, Nasdaq Business Debut

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