a 10-12x revenue valuation is not unreasonable for publicly traded companies
I know a lot of publicly traded "cloud" companies are in fact valued like this. I suspect very strong that this is because analysts thing that they have cracked a business model that is very easy to predict and expand rapidly: very low capex, very low-churn (earnings calls talking about "retention rates", NPSs), and easy to predict even high growth (ARR retention/expansion).
I think several early players like SFDC and Splunk have created this impression.
P/S > 3-4 had been pretty unusual up until recently. All companies are worth the discounted sum of their future cashflow, whatever that may be. To see P/Ss 10+ you are projecting both serious growth and very high margins. I wonder if one looked at the whole space if the 5 year projected earnings of all the companies together would make sense, or if we're collectively under-discounting risk (ie, sum total of all cloud SaaS companes far exceeding the reasonable TAM)
All that being said I think you entirely nailed the chain of events leading up to the acquisition.
I know a lot of publicly traded "cloud" companies are in fact valued like this. I suspect very strong that this is because analysts thing that they have cracked a business model that is very easy to predict and expand rapidly: very low capex, very low-churn (earnings calls talking about "retention rates", NPSs), and easy to predict even high growth (ARR retention/expansion).
I think several early players like SFDC and Splunk have created this impression.
P/S > 3-4 had been pretty unusual up until recently. All companies are worth the discounted sum of their future cashflow, whatever that may be. To see P/Ss 10+ you are projecting both serious growth and very high margins. I wonder if one looked at the whole space if the 5 year projected earnings of all the companies together would make sense, or if we're collectively under-discounting risk (ie, sum total of all cloud SaaS companes far exceeding the reasonable TAM)
All that being said I think you entirely nailed the chain of events leading up to the acquisition.