What to know about Asana’s 2020 IPO

On Monday, August 24, a whole slew of SaaS companies filed to go public. Asana — a teamwork management program for web and mobile use — was one of them. With the drastic shift to remote collaboration as a result of the COVID-19 pandemic, the timing is interesting, but it’s far from the full picture. Here’s what we know about the Asana initial public offering (IPO), including their direct listing status, fundraising efforts that led up to this point, the Asana IPO date and what investors should know before diving in.

TL;DR

    • Facebook co-founder Dustin Moskovitz started Asana in 2008 in partnership with ex-Google and -Facebook software engineer Justin Rosenstein.
    • As of 2018, Asana was valued at $1.5 billion. Their losses are significant, but executives say it’s for the purpose of expansion and growth.
    • Asana has had 5 official fundraising rounds plus an angel round, all of which total more than $200 million in investments.
    • The Asana IPO is taking the form of a direct listing. This means they’re not using an underwriter nor creating new shares; instead, existing shareholders will sell a certain portion of their ownership to the public based on secondary market valuation. Eventually, Asana will be listed on the New York Stock Exchange.

A brief company history

Asana has been building its San Francisco-based brand for more than a decade. Facebook co-founder and Asana CEO Dustin Moskovitz started the business in 2008, along with storied software engineer Justin Rosenstein (in the past, Rosenstein has engineered for Google and Facebook). While at Facebook, they both influenced collaboration within the workplace, so they decided to bring that skill set to an independent endeavor.

It wasn’t until four years later, in 2012, that the business launched their commercial software product. By 2018, Asana’s valuation hit $1.5 billion. At the same time, Asana celebrated a big win: 50,000 paying customers (in addition to their millions of free users) and a 90% year-over-year rate of revenue growth. 

Despite impressive growth, Asana has also experienced a surprisingly thick net loss. Thanks in part to a 51% increase in cost of revenue earlier this year, fiscal year 2020 saw a $118.6 million net loss (along with a simultaneous $142.6 million revenue expansion). To Asana, it seems, growth costs.

Asana isn’t the only collaborative software on the market. In fact, it’s a rather saturated sector, with competition from businesses like Trello, Basecamp, Slack and — naturally — Teamwork. But with an ongoing emphasis on AI advancements that streamline the entire idea of collaboration, as well as a push into the international market, they may just be able to differentiate themselves.  

The word asana means “yoga pose” in Sanskrit. Knowing this, it makes sense that Moskovitz and Rosenstein rely on the collective mindset to propel their business forth. The CEO himself even admits walking out of meetings to avoid influencing decisions with his “two cents.” Overall, it seems that the company’s leadership seeks to redefine the Silicon Valley status quo for its around-500-person workforce.

A peek into Asana fundraising efforts

Asana has a busy fundraising history. Their first was a round of angel investors in 2011 tallying $1.2 million. Shortly thereafter, a Series A round brought in $9 million from Benchmark Capital. But the investments don’t end there — here’s a list of all subsequent fundraising rounds leading up to the Asana IPO:

  • 2012 Series B: $28 million from Founders Fund and Peter Thiel, who then went on to join Asana’s board (investors valued the company at $280 million)
  • 2016 Series C: $50 million from Sam Altman of Y Combinator, a startup investing business that also claims the spot of Airbnb’s first investor (investors valued Asana at $600 million)
  • 2018 Series D: $75 million from Al Gore’s own Generation Investment Management (investors valued the company at $900 million)
  • 2018 Series E: $50 million from Generation Investment Management (investors valued the company at $1.5 billion)

The fifth round of funding is most noteworthy, mostly because it occurred just 11 months after the prior round. This Series E is also what pushed Asana into unicorn status — AKA a privately held startup company valued over $1 billion. Despite its incrementally increasing valuation, Asana had yet to report profitability as of the most recent fundraising round.

Path to the Asana IPO

The Asana IPO is news right now, but the process has been ongoing for months. Back in February of 2020, when the stock market hit its lowest since the Great Recession, the company began the SEC process in confidence.

The SEC works on their own time for the review process, so it’s hard to say how long any particular review is going to take. But Asana has officially filed their S-1 (just like Airbnb recently did) with the SEC’s approval, so the details will soon be forthcoming. And unlike Airbnb, Asana was fully open with their plans to take the direct listing route from the get-go.

What ‘direct listing’ means

The Asana IPO is a direct listing. A direct listing is a type of IPO, but the process differs. Here’s the rundown.

In a traditional IPO, the company enlists the help of an underwriter (typically a bank) to help them court investors, create new shares and determine a starting price per share. The underwriter’s job is a big one, and they even help out with the SEC’s regulation requirements (which can be tedious). In a firm agreement, the underwriter will purchase the shares themselves and sell them off for a profit, virtually guaranteeing that the company will sell all its shares because the bank will make sure of it (after all, it’s their investment on the line). 

With all this in mind, the main highlight here is that the company is creating new shares as a method of raising capital.

On the contrary, a direct listing — AKA direct IPO, direct public offering (DPO) or direct placement — requires no underwriter. In addition, the company does not create new shares. Instead, the company will take existing shares and sell them to new investors.  

There are a couple of reasons companies might with a direct listing instead of a traditional IPO, namely:

  1. They can’t afford or don’t want to pay an underwriter.
  2. They don’t want to water down existing shares.
  3. They want to avoid a lockup period that tends to accompany the IPO process.

So how does the public get shares? Existing shareholders, in the form of investors or employees, will sell them off to the public via the secondary market. That’s reportedly what Asana shareholders have been doing this year in an attempt to value the company in the public eye — an important factor in determining per-share value before they move on to the New York Stock Exchange (NYSE).

It’s worth noting that even though Asana doesn’t have an official underwriter, they do have some big-name financial advisers to help them out. Morgan Stanley, J.P. Morgan, Credit Suisse and Jefferies are all involved in advising the Asana IPO.

The Asana IPO isn’t the only one that’s working via direct listing. Recent high-profile direct public offerings include Spotify and Slack, who are now trading publicly.

Next steps for the Asana IPO

Like we said, private shareholders have been trading in the secondary market to get shares in the hands of the public before they’re ultimately listed on the NYSE. This is a crucial step, because they don’t have an underwriter to value the shares themselves, so they require the guidance of the secondary market to do it for them (currently, the secondary market is valuing the company at around $5 billion). But the Asana IPO is a unique case. They may be growing, but the company has yet to see profit; in fact, they’re losing quite a large amount of money.

As mentioned earlier, Asana lost $118.6 million in fiscal year 2020 while gaining a revenue of $142.6 million during the same time frame.

As the Asana IPO goes live, investors and stock market enthusiasts will surely be keeping their eyes peeled for market reactions considering these financial circumstances. And once they’re officially in the publicly illuminated limelight, it’ll be interesting to witness the company’s economic standing with all cards on the table.

When is the Asana IPO date?

The official filing date for the Asana IPO is August 24, 2020, though they confidentially began the process back in February. The SEC has approved the draft registration paperwork and noted it on their website.

We don’t yet know when the privately held shares will move from the secondary market to the NYSE. We also don’t know how many shares they will sell (CEO Moskovitz owns the largest share at 39%) nor what the price per share will be. Until then, we’re on the lookout.

What investors should know

Investing in any stock carries risk, but an IPO that’s new to the market does tend to bear a bit more weight. As an Asana IPO investor, you’ll want to stay up to date on documents like the prospectus (which shares in detail the company’s financial standing) and any other paperwork that comes through the SEC. You can visit the company’s Edgar page on the SEC to see what’s going on.

Bottom line

With a recent whirlwind of IPO launches, it seems the stall that took place the first half of the year (largely due to the COVID-19 pandemic affecting nearly every sector of the market) is over. Companies are eager to delve into the public eye and earn capital once again. And while the Asana IPO may be nontraditional in the form of a direct listing, we’ll still be seeing their ticker on the NYSE in due time. When that moment comes, investors will benefit from keeping an eye on their finances to see if the company makes up for their historically bold losses.

Rachel Curry is Pennsylvania-based content writer and journalist talking all things finance. She likes to give meaning to numbers by humanizing them. You can connect with her on Twitter at @writingsofrach.

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