Quick observations on Udemy’s unicorn edtech IPO

Edtech unicorn Udemy priced its IPO at $29 per share, the upper end of its IPO range. Using a simple share count, the company was worth around $4 billion at its IPO price and a few hundred million more if a full -diluted share count is employed in our valuation calculations.

For edtech, the Udemy IPO might seem like good news. After all, the company sold more than $420 million worth of its stock while going public at a price that surpassed its final private-market price. And yet.

In trading today, shares of Udemy declined $1.80 per share as of the time of writing, just over 6%. As far as IPO results go, that’s not the sort of opening day CEOs dream of.

Investors, either.

After tracking the company’s financial evolution and its pricing in some detail, this afternoon we wanted to offer a few observations regarding the final accounting of the Udemy IPO as it has been written thus far.

Shifting to business sales isn’t a panacea

Inclusive of its trading declines, Reuters pegs the Udemy’s value at $3.7 billion. Recall that based on its own estimates, Udemy had revenues between $125.7 million and $130.9 million in the third quarter. That figure puts Udemy on a run rate of $523.6 million. Or, in multiples terms, Udemy is worth 7x its present revenues.

For software companies that sell to other businesses, that’s far lower than we’d usually see. The company’s somewhat flat revenues in 2021 compared to 2020 are likely to blame for why that number is so low compared to SaaS norms. But muted growth expectations for coming years are also a factor — and edtech in a post-pandemic context, at least from an investor mindset perspective, may be at play.

So, sure, it’s good that Udemy is shifting to selling to stickier, and likely more lucrative corporations, but until that proves to unlock net revenue growth, the company’s valuation appears ready to hold fast in second gear.

Private-market edtech valuations may have plateaued

Crunchbase pegs the final Udemy private-market price at $3.25 billion. PitchBook has it down to $3.3 billion. Regardless, the company did manage to surpass its final private price. But only by so much.