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Summary:

In contrast to an analyst report this week, I’ve heard that Silver Spring Network’s IPO plans are still on and that the company could go public within the next four weeks.

powergrid26

In contrast to the findings of a research note on Tuesday that says Silver Spring Networks could soon shelve its IPO, I’ve been hearing that Silver Spring is actually getting ready to finally go public within the next four weeks, a year and a half after filing its S-1. A delay that long between filing and finally trading is not ideal, but it’s not unheard of for companies to wait through difficult market conditions, particularly as they negotiate pricing.

Beyond discussions I’ve had with sources, in Silver Spring’s latest S-1 Amendment the company notes that longtime investor Foundation Capital now says it plans to purchase $12 million worth of stock at the IPO price, following the IPO, in a private placement. If Silver Spring was planning to shelve its IPO it probably wouldn’t be negotiating this detail with its investor, and also wouldn’t continue to update its S-1 every quarter (it would just withdraw it).

Solar installer SolarCity’s investors used a similar tactic when the company went public last year to try to create interest from Wall Street. SolarCity investors Elon Musk, Draper Fisher Jurvetson and DBL Investors, agreed to buy up about a third of the Solar City float the day before trading, and that helped it get out and pop on its first day. Bankers could take it as a good sign that Foundation Capital is looking to buy up even more shares of Silver Spring.

Silver Spring has continued to grow over the years, despite the fact that selling smart grid networks to utilities is a pretty difficult low margin business. If you only look at Silver Spring’s GAAP revenue and net income it doesn’t look all that amazing, which is what this analyst did. The company hasn’t ever had a positive net income, and it recorded revenue of $147 million for the nine months ended Sept 30, 2012, which was down from $176 million from the same period in 2011.

But if you look at the deals that Silver Spring closed in 2012, and the amount it billed its utility customers for, it actually had a decent year last year. The company recorded billings of $219 million for the nine months ended Sept 30, 2012, up from $183 million for the same period of 2011. Billings are how much Silver Spring invoiced its customers, and they are considered deferred revenue until they can be officially counted as revenue. It had its highest gross margin yet on those billings of 34 percent. The company has a total of $473 million in deferred revenue as of the nine months ended September 30, 2012, and about $60 million in cash for the same period.

That’s the problem with selling gear to utilities. The deals and the sales cycles take a really long time to negotiate from a trial to a commercial deal, and then a long time to see through to the end. We’ll see how comfortable Wall Street is with looking at both its GAAP and non-GAAP financials when it comes to interest in the IPO.

Silver Spring Networks has networked 13 million smart grid devices, and has contracts to network more than 22 million total. The company has a total backlog of $745 million in product and service billings.

Now, we’ll see if over the next four weeks, Silver Spring is able to negotiate and get enough interest to price its shares at the valuation it wants. But from what I’m hearing it’s starting to aggressively try to do just that.

  1. michael kanellos Tuesday, January 29, 2013

    Ha. great story. that “research” note was somewhat comical.

  2. I wonder how the impact of reduced stimulus dollars to this sector will impact new projects and roll-out by utilities in the coming years. The play here is clearly in the infrastructure side.

  3. Wallstreeter NYC Friday, February 1, 2013

    I follow PrivCo religiously on its IPO research, and they have been right 100% of the time (yes 100%) on their IPO predictions. That’s both positive (Workday, Palo Alto Networks, both up over 50% in just a few months) and negative (Zynga down 80% from IPO, Facebook down 30% from IPO, Groupon down 75% from IPO).

    Ignore PrivCo’s IPO analysis at your own peril.

    Oh and btw, Silver Spring Networks revenues are now DECLINING. And if everything’s so great, how come they weren’t able to go public when they filed for their IPO IN JULY 2011 and cleantech was all the rage??? So now Silver Spring is all right on schedule? Ha. As a former IPO banker I can tell you a smooth IPO takes 90 days, not 2 years. 2 years means nobody was interested, get it? And in the meantime they’ve had to go begging hat in hand to their VCs to cover operating losses since nobody wants the IPO.

    So to Michael Kanellos, I assume you have vested interest in cleantech meters or SSN succeeding, but take off the rose colored glasses…PrivCo’s totally independent research co, not an investment banking firm, so they don’t care if company succeeds or fails. I’d trust that analysis any day….as I have, to my profit!

    >>
    Ha. great story. that “research” note was somewhat comical.

  4. Wallstreeter NYC Saturday, February 2, 2013

    If they’re “about” to IPO” why haven’t they done it already when they filed in summer of 2011? It’s almost 2 years since??? Hugh??

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