initial public offerings (IPOs) trading on American exchanges

Monday, October 15, 2018

SendGrid (SEND) to be acquired by Twilio (TWLO) for $2 billion

Twilio (TWLO) said it has agreed to buy the Denver-based email platform company for $2 billion in an all-stock deal. Under the terms of their agreement, a Twilio subsidiary will be merged with and into SendGrid, with SendGrid surviving as a wholly owned subsidiary of San Francisco-based Twilio, the companies said.

At the closing, expected for the first half of 2019, each share of SendGrid stock will be converted into the right to receive 0.485 shares of Twilio stock, representing a per-share price for SendGrid stock of $36.92 based on Twilio's closing price on Monday. Both boards will have to approve the deal. The companies will report third-quarter results on Nov. 6, but they said Monday they both have exceeded their guidances provided earlier in the year. Guidance for a combined company will be provided after the deal is closed, the companies said.

** charts after announcement **


** charts before  announcement **



SendGrid Moves From 'Pipe To Application'

"Growth drivers for SendGrid are fairly straight forward — it's adding customers and getting those customers to send more emails through SendGrid pipes," Piper Jaffray analyst Alex Zukin said in a note to clients.

Zukin added that Sendgrid is moving from "pipe to application." That means adding more value-add marketing services to a business that sends over a billion emails a day. Customers include Uber, Yelp, eBay, Spotify, Airbnb and Glassdoor.

"Future products, much like Marketing today, should come with higher prices and margin profiles," Zukin said. "Cost per email for the company's marketing application are 3 times to 4 times that of core Email API. The company believes that at scale marketing has the potential to be more profitable than Email API."

Other companies that use cloud-based APIs include digital payments startup Stripe and Twilio, the latter of which sells communications messaging software.

Following its IPO, SendGrid stock moved up steadily, closing around 31 on March 9. SendGrid stock fell 10% on May 2, the day after it reported first-quarter results as investors were disappointed.

But SendGrid's second-quarter results, which came on July 31, sparked a rally. Profit climbed to 5 cents per share from 2 cents a year earlier. Revenue jumped 32% to $35.7 million.

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