Pivotal Software files for IPO, with Dell to remain in control

$500m/year run rate fuelled by Cloud Foundry subscriptions, but big losses too

Dell’s Pivotal Software limb has filed for an initial public offering.

Pivotal’s Form S-1, the document filed before an IPO, makes for interesting reading as it reveals annual revenue of US$509m for FY 2017/18, up from $416m in 16/17 and $280.9m in the preceding year. But the company also posted net losses for those years, of $163.5m, $232.9m and $282.7 respectively, leaving it $1.1bn in the hole.

Yet the IPO seeks to raise only up to $100m, hardly enough to fund a year of current losses, much less the expansion to the S-1 outlines.

Also interesting is the company’s post-float structure. Investors will be offered Class A shares, which have a single vote apiece. Dell and VMware will hold all of the company’s Class B stock, which has ten votes apiece. The filing therefore contains all sorts of warnings to would-be investors about Dell’s ability to boss the listed Pivotal and ignore shareholders’ wishes.

There’s also lots of good news about Pivotal in the S-1. The company already has over $250m of annual subscription revenue for Pivotal Cloud Foundry, drawn from over 300 customers. Its “Labs” consulting business is going well and when customers engage with it they tend to spend more in Cloud Foundry afterwards.

The prospectus doesn’t mention how many shares it plans to sell, but has capped the sum earned at $100m and expects to list later in 2018.

A Pivotal IPO has been rumoured for years. But with only $100m on offer this transaction is a drop in the ocean of Dell’s $50bn+ debt and almost certainly no indicator of the company’s wider plans, which have of late been suggested to include a reverse merger of VMware, with pike, twist and pirouette throw in for good measure. ®

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