Last week was a major one for Life360 Inc (ASX: 360) and its shares.
In case you missed it, the location technology company launched and completed its Nasdaq initial public offering (IPO).
It raised funds by offering a total of 5,750,000 shares of its common stock to US investors at US$27.00 per new share.
Life360 advised that it intends to use the net proceeds it receives from the offering to increase its capitalisation and financial flexibility, to create a public market for its common stock in the United States, and for general corporate purposes, including working capital, operating expenses and capital expenditures.
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What are brokers saying about the IPO?
Bell Potter has been busy adjusting its financial model to reflect the IPO. It said:
We have updated our forecasts for the NASDAQ listing but there are no changes in our underlying revenue or EBITDA forecasts. The two key changes we have made are a 3.7m increase in the number of shares on issue – or 11.1m CDIs – and a net increase in cash of c.US$83m (i.e. we assume c.US$17m in underwriting commissions and other expenses related to the offering).
We assume most or all of the expenses related to the offering will impact statutory EBITDA in 2024 but at this stage we make no change to our forecast given the exact amount is unknown and in order to be consistent with the current guidance. We would expect the statutory EBITDA guidance to be updated at the release of the 1H2023 result in August when the actual costs are known and will then look to update our reported forecasts.
Should you buy Life360 shares?
The broker remains very positive on Life360's shares and sees major upside for them over the next 12 months.
Bell Potter has responded to the IPO by reaffirming its buy rating with a slightly trimmed price target of $17.00. This implies potential upside of 23% for investors. It concludes:
We reduce the multiple we apply in the EV/Revenue valuation from 6.5x to 6.25x given the potential catalyst of the US listing has now been removed and, furthermore, the IPO price was at a discount to the market price on the ASX. There is, however, no change in the 9.3% WACC we apply in the DCF. The net result is a 4% decrease in our PT to $17.00 which is still >15% premium to the share price so we maintain our BUY recommendation. The next potential catalyst we see for the stock is the H1 result in August – or any update provided sooner – given we expect another solid result.
