Pure Storage Prices IPO, Looking To Raise Up To $450M

Pure Storage on Thursday priced its widely anticipated IPO, giving it a valuation that one of its top partners said shows the all-flash storage array vendor has the validity to be a major force in the storage industry.

Pure Storage, in an update to its SEC S-1 filing, said it anticipates an initial public offering price of between $16 and $18 per share for 25 million shares. At the upper end of that range, the IPO would raise about $450 million for the company. Reuters estimated that would give Pure Storage a total valuation of about $3.3 billion.

The proceeds of the IPO are slated to increase the company's capitalization and financial flexibility, increase its marketplace visibility, expand product development and sales and marketing organizations, and potentially be used to acquire or invest in new technologies, solutions or businesses.

[Related: Pure Storage Unveils First Custom-Built Hardware For Its All-Flash Arrays]

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Pure Storage did not specify the date on which the IPO will happen, and company spokespeople declined to provide further information, citing the pre-IPO quiet period.

Pure Storage has been talking about its goal to raise from $300 million to $400 million for some time, so the possibility of raising $450 million is good news, said John Woodall, vice president of engineering at Integrated Archive Systems (IAS), a Palo Alto, Calif.-based solution provider and longtime Pure Storage channel partner.

"If Pure Storage can indeed raise $450 million, it says a lot," Woodall told CRN. "I hope they make it. That will allow the company to continue its expansion."

Becoming a public company will also help show the validity of Pure Storage and its business model, Woodall said.

"Companies that go through their IPOs will start giving guidance and forecasts, and will show their viability," he said.

The Pure Storage S-1 filings before the IPO brought a potential issue to the foreground.

For instance, when the initial S-1 filing was posted in early August, Pure Storage published revenue of $174.4 million for its fiscal year 2015, ended Jan. 31. However, as reported by the Register, analyst firm Gartner estimated Pure Storage's revenue to be $276 million, a figure Pure Storage CEO Scott Dietzen cited in a presentation early this summer without mentioning that it differed significantly from the actual revenue. Dietzen at the time defended his comments by cautioning that Pure Storage was a private company, and that the Gartner numbers may not be accurate.

Woodall said the controversy over the Pure Storage vs. Gartner numbers may not impact Pure Storage's IPO, as investors have already had the opportunity to factor it into their expectations.

"Pure had the financial responsibility to ensure it used the truth," he said. "But it also had a responsibility to protect its investors. Gartner seems to have showed irrational exuberance."

In the S-1 filing, Pure Storage reported revenue of $174.4 million and a net loss of $183.2 million for fiscal year 2015. For the first six months of fiscal 2016, Pure Storage reported revenue of $158.7 million and a net loss of $113 million. As of July 31, the company had $128.3 million in cash and cash equivalents.

Pure Storage also wrote in the S-1 that the company depends heavily on indirect sales, and will continue to do so. "We intend to continue to invest in the channel to add more partners and to expand our reach to customers through our channel partners’ relationships," the company wrote.