MuleSoft Could Temporarily Sink When Lock Up Expires

September 13, 2017 concludes the 180-day lockup period on MuleSoft Inc. (NYSE: MULE).

When the lockup period ends for MULE, its pre-IPO shareholders, directors and executives will have the chance to sell their 112.9 million shares for the first time since the IPO. The potential for a sudden increase in stock available in the open market may cause a significant decrease in the price of MuleSoft shares.

Currently, MULE trades in the $21.50 to $23 range, well above its IPO price of $17. This represents an increase of ~27%.

Our firm’s research has shown significant price declines surrounding many IPO lockup expirations, particularly for firms like MULE where a large number of shares - here, approximately 89% - are restricted. Additionally, VC investors tend to be particularly eager to sell once restrictions are lifted.

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(Source: S-1/A)

Business Overview: Provider of the Anypoint Platform

MuleSoft owns and operates its Anypoint Platform, which integrates and connects applications, devices, and data sources. Clients may use the platform either on-site or access it via the cloud. The hybrid integration platform enables clients to connect their applications, devices, and data into a network with pluggable APIs rather than gluing them together with customized integration code.

This means that additional applications can be built rapidly with building blocks, giving organizations the ability to scale, innovate, and change applications, which prevents bottlenecks. The company was formerly known as MuleSource Inc. and changed its name to MuleSoft, Inc. in September 2009. MuleSoft, Inc. was incorporated in 2006 and is headquartered in San Francisco, California.

Financial Highlights

MuleSoft reported the following highlights for the second quarter of fiscal 2017, which ended on June 30, 2017:

  • Total revenue was $69.2 million, an increase of 57% year over year.
  • GAAP gross margin was 73.5%, an increase of 40 basis points compared to the same period in 2016. Non-GAAP gross margin was 75.1% for Q2 2017, an increase of 160 basis points compared to the same period in 2016.
  • GAAP operating loss was $19.0 million, compared to a GAAP operating loss of $11.8 million for the same period in 2016. Non-GAAP operating loss for Q2 2017 was $12.1 million, compared to a non-GAAP operating loss of $10.4 million for the same period in 2016.
  • GAAP net loss per share was $0.15 based on 128.8 million weighted average shares outstanding in the second quarter of 2017. The GAAP net loss per share for the second quarter of 2016 was $0.60.
  • Non-GAAP net loss per share was $0.10 based on 128.8 million non-GAAP weighted average shares outstanding in the second quarter of 2017. The non-GAAP for the second quarter of 2016 was $0.10.
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Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in MULE over the next 72 hours.

Disclaimer: I wrote this article myself, and it expresses my own ...

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