MULE

I just started reading the prospectus and wondered if anyone has opinion concerning their
two tier share structure?

Class A common stock offered by us
13,000,000 shares
Class A common stock to be outstanding after this offering
13,000,000 shares
Class B common stock to be outstanding after this offering
112,991,577 shares

Total Class A common stock and Class B common stock to be outstanding after this offering
125,991,577 shares

Following this offering, we will have two classes of authorized common stock, Class A common stock and Class B common stock. The holders of our Class A common stock are entitled to one vote per share, and the holders of our Class B common stock are entitled to 10 votes per share, on all matters that are subject to a stockholder vote.

In case someone besides me doesn’t know anything about this, it’s the Mulesoft IPO:
http://www.nasdaq.com/markets/ipos/company/mulesoft-inc-7200…

Well, it’s got software right in the name, so buy it up and get rich! :slight_smile:

I just started reading the prospectus and wondered if anyone has opinion concerning their
two tier share structure?

A lot of internet companies do this, from Facebook on. It is what it is. I rarely vote in corporation voting anyway. It’s a question of whether you have confidence in management, and if you don’t you probably shouldn’t invest in the company anyway.

Saul

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Thanks for your reply Saul. I am trying to evaluate the company–it appears expensive,
but it does have high growth going for it.

I was wondering how you balance the high growth vs the lack of likely earnings for several years, if Bert’s look at it are valid. Buying a company with no earnings seems to go against the points in your Knowledge base. In some ways this is a story stock.

From the article:

MuleSoft is growing very rapidly and growth through the end of 2016 was a bit greater than 70%. It loses lots of money, although perhaps somewhat unusually, last year saw expenses rise at a rate significantly below revenues and at a far slower cadence than the prior year. At least management is somewhat aware that investors expect palpable returns as a reward for owning shares and that not quite all of the valuation of a company can come from growth.

That said, however, GAAP sales and marketing expense came to 65.3% of revenues, a ratio that would never allow the company to become profitable. It is however, an improvement when compared to the 85% sales and marketing expense ratio recorded for 2015. Research and development expense was a surprisingly modest 17.5% of revenues, a fall of 450 basis points from that expense ratio the prior year. One might wonder, I suppose, if a company can create a category killer with research and development spending of $33 million/year. It is certainly a more modest ratio than was the case for vendors of application integration solutions when they were public and reporting numbers.

The company’s GAAP operating loss in Q4 was 24% of revenues. That is a significant improvement from the 43% operating loss seen in the same quarter of 2015, but the cadence of improvement suggests that GAAP income from operations is still at least 2-3 years away.

Buying a company with no earnings seems to go against the points in your Knowledge base. In some ways this is a story stock.

You are right, although a classic story stock is one with no revenue at all (like ZioPharma, for instance). I’m well aware of that it’s against my principles, which why I’ve kept my positions in both of them so tiny (by the position standards of what a full position means to me). They are small enough that if they both fell by 50% I’d be out 1% of my portfolio, and I can certainly live with that. I decided to take the position in ZioPharma, because I think that, like Kite which is much further along, it has potential huge, huge growth ahead of it. I took a tiny position in Mule because just about everything that Bert said in his article about the company was good, until his conclusion that it was too expensive. I was seduced by all the good stuff and wasn’t listening by the time he got to evaluation.

Hope this helps explain it.

Saul

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They are small enough that if they both fell by 50% I’d be out 1% of my portfolio, and I can certainly live with that.

In fact, to put it in perspective, if they both fell 75% (!) it would cost me a little less than what my portfolio has gained today in one fairly ordinary market day.

These are speculative positions, and I hope that I’ve made that very clear that I’ve kept them very small on purpose, and I would think it’s a good idea for others to do the same. (Although that doesn’t mean that I might not add to one or both in the future if the spirit moves me).

Saul

Saul, thanks–your response is appreciated, and along the lines
of what I guessed you were thinking. I put MULE on a watch list
until I read up on them more.

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