LegalZoom’s latest filing with the SEC shows it is valuing its upcoming IPO shares at between $24 and $27, and according to Reuters this will give the company a total valuation of over $5 billion, while raising up to $0.5 billion.
Meanwhile, according to Renaissance Capital, Intapp, which filed for IPO on the same day as LegalZoom, plans to raise $278m. The financial group said it estimated that ‘Intapp would command a fully diluted market value of $1.9 billion’.
Wow. It is still a surprise when you see the word ‘billion’ in connection with a legal tech company. How times have changed, (see more below).
But…..in Australia, the eDiscovery company Nuix, which had its IPO in December 2020 is not doing well. Overconfidence about the company’s performance has caused concern and senior staff got the chop last week. Meanwhile the share price has been steadily collapsing, (see below).
As you can see, IPOs are not guaranteed to work well – in fact they can do the exact opposite of what a company is hoping for. In Nuix’s case, its share price today is at AUS$2.6, and has dropped more than 75% since the peak price in January this year when it stood at around AUS$11.
What does all of this mean?
To most lawyers and clients who may be using these companies it may all mean very little right now. High valuation or low valuation, rising share price or falling share price, over the short-term the software or service remains largely the same. But, over the long-term there is an impact.
Having a public listing brings investor scrutiny 24/7. There is no let up in the attention from those who have put a lot of money into your company. Big valuations generate high expectations – and when they don’t meet those expectations people get the chop, and prices sink.
All of that can create chaos inside a business’s management team and that in turn can eventually have a detrimental impact on the product. Likewise, when things go well and growth tallies with investor expectations then everyone is happy. Staff who have shares are doubly incentivised and key managers likely stay in place. And that eventually can have a positive impact on the products they make.
The reality is that although all this talk of IPOs and billions of dollars may seem very far away from legal tech land’s daily work, it will eventually filter through and have an impact, for good or ill.
As mentioned before by this site, (Legal Tech Comes of Age), our sector is changing now. Legal tech has found the attention of Big Money. There are good things there – more investment, support for growth, and more jobs. But also a reverse side – more pressure, regulatory oversight, and chaos in the C-suite when things don’t work out.
Legal tech’s coming of age clearly won’t be without its casualties.