Thoma Bravo agrees to buy Coupa for $8bn

After weeks of speculation around the price Coupa Software could fetch in an acquisition, the matter was finally concluded with Thoma Bravo agreeing to purchase the company for $81 a share. Previous estimates had been higher, however, with investor HMI Capital saying the stock was worth $95 a share.

- Thoma Bravo has agreed to buy cloud company Coupa for $8bn

- In its Q3 earnings report on Monday, Coupa announced an $84.7m loss for the quarter

- Global X Cloud Computing ETF down almost 40% this year, but up over past 30 days

Coupa Software [COUP] said on Monday that it has entered into a definitive agreement to be acquired by investment firm Thoma Bravo.

Coupa shareholders will receive $81 a share in cash, a 77% premium to Coupa’s closing share price on November 22, the last full trading day before media reports about a possible sale began circulating.

“The board is unanimous in its belief this transaction is the optimal path forward and in the best interest of our shareholders,” said Roger Siboni, Coupa’s lead independent director.

The deal is expected to close in the first half of 2023.

Last week, HMI Capital announced that it believed software-as-a-service (SaaS) company Coupa could fetch as much as $95 a share in a sale. 

The investment firm, which owns a 4.8% stake in Coupa, said that it would not support a sale unless it was at an appropriate price but acknowledged current market conditions meant it might be hard to realise Coupa’s real value.

Year-to-date, the stock has slumped by a sobering 60.7% since ending 2021 at $158.05. In November, the stock sank as low as the $40 mark.

Overall, cloud shares have continued to plummet in 2022 amid the wider tech selloff, despite an easing up on borrowing costs.

Justifying the Coupa price tag

Not all predictions were as optimistic for Coupa’s share price value as HMI’s. Earlier in December, an analyst at Raymond James said Coupa could see $80 a share in a buyout, while analysts at Credit Suisse predicted a more modest $60-$70 deal. 

Coupa released its  fiscal Q3 2023 earnings  on Monday. The company reported a net loss per share of $1.11, compared to $1.23 a year earlier. Revenues came in at $217.3m, up 17% year-on-year, beating the Zacks estimate of $212.36m.

At its Q2earnings, reported in September, Coupa announced record quarterly subscription sales of $193m, or year-over-year growth of 23%, while record revenues of $211m reflected an uptick of 18% year-over-year.

The consensus among 31 analysts polled by CNN amid the takeover talk was to ‘hold’ Coupa stock.

Cloud stocks struggle amid rising interest rates

Coupa is a cloud-based technology platform specialising in business spend management, covering invoicing and payments.

Software and cloud stocks are down around a hefty 40% in the year-to-date in 2022, and have hugely underperformed the S&P 500, which is down 17.5% in the same period.

The cloud sector has been particularly badly hit by high inflation and rising interest rates, something it is especially susceptible to as companies attempt to attract funding.

According to Grand View Research, the global cloud computing market was worth $368.97bn in 2021 and, despite current challenges, is expected to grow at a CAGR of 15.7% between 2022 and 2030 as the trend for remote working continues post-pandemic.

Emergent technologies such as artificial intelligence and machine learning are also predicted to help cloud growth reach its full market potential.
 

Fund in focus: Global X Cloud Computing ETF 

Coupa is currently the Global X Cloud Computing ETF’s [CLOU] biggest holding, with a weighting of 4.89%, meaning it is ahead of other names in the portfolio, such as Workday [WDAY] and Shopify [SHOP]. 

However, the fund, which focuses on companies within the cloud computing sector (including software-as-a-service and platform-as-a-service), has continued on a downward trajectory in 2022, despite recent drops in interest rates. It has fallen by 38.9% year-to-date, though in the last 30 days, it has seen some signs of recovery,

Coupa is also held in the WisdomTree Cloud Computing ETF [WCLD], with a weighting of 1.52%. The fund has declined by more than 50% year-to-date but has also seen modest growth in the last month.