Xactly Corporation Announces Pricing Of Initial Public Offering
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San Jose, CA —June 25, 2015–Xactly (NYSE: XTLY) announced today the pricing of its initial public offering of 7,037,500 shares of its common stock at a price to the public of $8.00 per share. Xactly is offering 6,853,500 shares of common stock and certain selling stockholders are offering 184,000 shares of common stock. In addition, Xactly has granted the underwriters a 30-day option to purchase up to an additional 1,055,625 shares of common stock to cover over-allotments, if any. The shares are expected to begin trading on the New York Stock Exchange on June 26, 2015, under the symbol “XTLY.” Closing of the offering is expected to occur on July 1, 2015, subject to customary closing conditions.
J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. are acting as joint lead book-running managers for the offering with UBS Securities LLC also acting as a book-running manager. Needham & Company, LLC and Oppenheimer & Co. Inc. are acting as co-managers for the offering.
A registration statement relating to these securities has been filed with, and declared effective by, the Securities and Exchange Commission (“SEC”). Copies of the registration statement can be accessed through the SEC’s website at www.sec.gov. This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the shares of Xactly’s common stock in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.
The offering is being made only by means of a prospectus. Copies of the final prospectus related to the offering may be obtained, when available, from: J.P. Morgan Securities LLC, Attention: Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, or by telephone at (866) 803-9204; or Deutsche Bank Securities Inc., Attention: Prospectus Group, 60 Wall Street, New York, NY 10005, or by calling 1-800-503-4611 or by email at email@example.com.
©2015 Xactly Corporation. All rights reserved. Xactly, the Xactly logo, and “Inspire Performance” are registered trademarks or trademarks of Xactly Corporation in the United States and/or other countries. All other trademarks are the property of their respective owners.
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Over the past 24 months if you’ve been in yield investments there’s a pretty good likelihood you’ve been shellacked. If you’ve run a more diverse portfolio, particuarly one with some Tech exposure, then you’ve had a good hedge against the yielders plunging. But that may be about to change, at least in the intermediate term.
If the yield bet had been that we’re in a slow growth environment for the foreseeable future, well, that was actually right as GDP growth has averaged at 2% and below. What may have been expected in such an environment was lower equity returns and higher risk adjusted returns accruing to capital that was placed “higher in the stack”. This is subordinated debt and other mezzanine type instruments that typically come with higher yields, greater safety, albeit lower total returns than straight equity. And many investors, like this one, would always trade away a few points of equity return for greater safety particulary when a diversified high yield strategy can still generate in excess of 11% total returns which beats most multi-strategy hedge funds. It’s also well in excess of even the 15 year average return from the Venture Capital and Private Equity segments.
Though something interesting has happened these last 24 months. The oil crash from the mid-$90s to the high $20’s per barrel (WTI) in company with the tantrums associated with expected hikes in interest rates have created fairly dramatic downdrafts in yield investments including BDCs, MLPs, and REITs. A very chaotic time indeed during which the IPO market has been open and closed several times, the S&P 500 has returned low single digits, and rates have been hiked, get ready for it, once by 25 basis points. Valuations for fixed income and quasi-fixed income assets have been down dramatically departing from a yield thesis that may have expected less volatility in owning securities more senior in the capital structure than straight equity.
I think the markets are finally beginning to figure this out. And what’s “this”? Well, that the individual assets held within a BDC are not going bankrupt. That a BDC holding senior debt and mezzanine securities in middle market companies shouldn’t be trading at a 25%-30% discount to the NAV of portfolio. Similar story with REITs and mREITS. The assets, the hedging, the leverage, and the shape of the yield curve simply don’t justify the large discounts at which they’ve been trading. MLPs have been pounded by the dramatic drop in the price per barrel of oil, this on the basis that there is too much supply and not enough demand with no OPEC leadership. This too will adjust in the coming 9 months as the amount of drilling capacity taken off-line globally is dramatic and will take years to reconstitute. The oil market is sentiment driven, if there ever was one, and the facts/reality tend to trail the hurd, not the other way around. Unless an MLP was over-leverage, many are/were, they’re under-valued materially particularly those in the mid-stream sector though even a number of the upstream E&P guys are trading at unjustified discounts given the quality of their assets and reserves.
Tech may be ready for a significant revaluing though I’d say avoid it at one’s own risk. I think much of the noise in the employment numbers these past 24 months has been related to the Fed’s difficulty in measure the uptick in productivity associated with the impact of Tech on how business is run across industries. Said another way, Tech is crushing it and owning great growth names in the sector is likely to keep paying investors for the foreseeable future. Could the valuations come off some here in the balance of 2016, yes and that’d probably be a good thing but I think the core Tech thesis is still in place and I own plenty of it.
In summary, patience not panic with the yield thesis is likely to pay off here in the intermediate term with signs of rationality and recovering returning to those segments. We are in a slow growth environment but defaults and bankruptcies don’t spike dramatically in the midst of a malaise like 2% GDP growth. Companies just don’t growth that much much they pay their bills, their employees, and their interest payments pretty steadily. And if people are getting paid, they make their mortgage and lease payments, they buy cars, etc, etc. and owning securities senior in the capital structure is a good place to be. Some times it just takes markets 24 to 36 months to deal with new realities. I think we’re getting there now.
If you like the energy sector and want to make a recurring revenue play other than some boring utility, Master Limited Partnerships represent a high yielding opportunity. You’ve got to be careful how you enter the sector as the choice between a mid-stream pipeline provider and a vertical driller can have real implications for how the investment behaves but the volatility for the publicly traded stocks in the sector has been low relative to traditional equities and the consistency of the dividend distributions has been solid.
UEI favors the mid-stream pipeline and storage players as they tend to sign long term lease contracts with customers reserving capacity and the mid-stream is less susceptible to the ups and downs of commodity (liquid natural gas, oil, and other transportable chemicals) prices. Issue to diligence is the amount of leverage they’re using, number of shares traded per day (gotta be a liquid stock in case you need to get out) and how you and your accountant feel about getting K-1s each year instead of 1099s and other more traditional tax reporting paperwork. The easy monetary policy provided by the Fed over the last 48 months has certainly given some tailwind for MLPs but the risk reward trade-off given the current yields and US Energy fundamentals is terrific.