BroadSoft Secrets Revealed: How Our IPO Went From Dud to Rocket Ship
By Jim Tholen, Managing Partner
BroadSoft went public in June 2010. We had filed to go public that March in a ‘frothy’ IPO market but by June many of the prospective IPO’s had been pulled from the market because market sentiment had gone very south. It felt like we barely got out.
While we did get public, we were pretty much ignored as a public company. We went public at $9.00 per share. For the next 5 months we traded between $7.50 and $9.00. Not your profile of a hot IPO!
From an investor standpoint, we seemed to be small and complicated. Even more challenging was that there was no notion of “cloud enterprise communications” - we were the first. We got push back - everything from “oh it's just voice” (never mind we were way more than voice) to “not sure that VOIP stuff will ever really work” (ha! we proved them wrong!).
Five months after the IPO, on Nov 4, 2010, we were still at our IPO price of $9.00. Then all of a sudden, our stock started moving up. By Dec 1, we are trading at $24. By the end of March 2011, we were around $44. Wow. Nose bleeds all around.
What caused us to move from kind of a dud IPO outcome to a rocket ship?
The first thing, I think was that we positively surprised the street for our Nov 2020 Q3 earnings report with turning profitable a quarter earlier than we had forecasted. I think this generally helped.
Funny enough, I think a bigger impact came during a game day decision we made in announcing earnings. It was the positive side of the law of unintended consequences.
I had been worried that analysts following us might start upping their expectations for the following year, 2011, beyond where Mike and I were comfortable.
So the morning of our announcing Q3, I came in and told Mike I wanted to add ‘soft’ guidance about 2011 in our November earnings call (to dappen down any irrational exuberance). His first reaction was “you want to do what?!” You have to remember that management teams like us work our earnings scripts hard, and practice our deliveries intently...so making a last minute change of consequence is generally a bad idea.
But I think that the fact that we were comfortable enough with our business to actually guide to revenue and earnings for the following year (on top of a nice earnings report) was enough to have investors take notice.
The final piece of the puzzle was actually driven by our dear sister company in the IP comms space, Acme Packet. As I described above, we had gone from a pretty ignored newly public company to having investors deciding to, well, look at us again and to invest. Once that happened, the shorthand view among comm tech investors (who still didn’t really get the enterprise cloud comms thing) was “hey BroadSoft is just like Acme but cheaper” so that every time Acme crushed an earnings report, our stock moved up….
The rest, as the saying goes, is history…..
