Tech firm Credo set for $1.8bn valuation from Nasdaq IPO
15:29, 19 January 2022
Credo Technology Group is set to join the Nasdaq, confirming details for its IPO, which could value the data networking company at around $1.8bn (£1.3bn).
Founded in 2008 and based in Silicon Valley, Credo provides high bandwidth connectivity services for markets such as data centres, 5G carrier telecom firms, enterprise networking and high-performance computing and artificial intelligence markets.
Credo’s range of networking chips, equipment and cables pipe data at over 100 times the rate of a home internet connection.
Market capitalisation
According to a regulatory filing, Credo intends to sell up to 28.8 million shares at $10 to $12 each, raising up to $345m for the company. After closing, Credo expects to have 148.7 million shares outstanding, if an underwriter option is exercised, giving the company a market capitalisation of $1.8bn.
Credo stock is expected to trade under the CRDO ticker symbol on the Nasdaq.
Goldman Sachs and BofA Securities are the lead underwriters for the offering.
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Demand for data
The company says it is well placed to benefit from the increased demand for data.
The amount of data created, captured, copied and consumed in the world is expected to increase 2.8 times from 64 ZettaBytes (ZB) in 2020 to more than 179ZB in 2025, Credo said, citing research firm International Data Corporation.
“We believe we are in the early stages of penetrating a massive opportunity. We benefit from the strong secular tailwinds in the data infrastructure market,” Credo said in the filing. “We are engaged with five of the top seven hyperscalers (cloud data centre companies) and our customer base includes over 20 blue chip clients”.
Although Credo did not identify any of its clients in its IPO filing, the major hyperscale clouds are provided by Amazon’s AWS, Alphabet’s Google Cloud and Microsoft Azure.
Financials
In the regulator filing, Credo cautioned potential investors that it has incurred net losses and may incur them in the future.
For the six months ended 31 October, Credo posted a net loss, which narrowed to $16.7m from $19.3m a year earlier.
Revenue rose to $37.2m from $25.5m.
Chip industry veterans
Credo was co-founded by Job Lam and Lawrence Cheng, and its board members include chip industry veterans.
Lam, an electrical engineer, serves as chief operating officer and was previously a design engineer at chipmaker Marvell Technology.
Cheng also worked at Marvell and is Credo’s chief technology officer.
The company is led by CEO Bill Brennan, who has been on Credo’s board since 2013 and previously worked at Marvell’s storage business.
Also on the board is former Intel and Micron Technology CFO David Zinsner, who is a non-executive director.
Credo recently named Lip-Bu Tan as chair. He has been on Credo’s board since 2019 and has a background in chip manufacturing in China.
Tech sector lull
The company’s Nasdaq debut comes at a time when tech stocks appear to be somewhat out of favour.
The Nasdaq-100 Technology Sector Index is currently 6% lower than at the end of 2021, while the broader S&P 500 Information Technology Index was 8% lower over the same period.
The $53bn Vanguard Information Technology ETF (VGT) is down 9% for the year to date.
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