Procore IPO – the construction tech company digitizing the outdated construction industry – The Average Joe
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    Procore IPO – the construction tech company digitizing the outdated construction industry

    Kevin Roche — Analyst

    May 20, 2021

    Procore IPO

    Procore IPO: America’s $1.3t construction industry is currently held up by excel, paper, and pen – the tools primarily used for multi-million dollar construction projects.

    One company wants to change that. Procore, the cloud-based construction software provider, is expected to debut on the NYSE this morning – a year after the pandemic postponed its initial IPO.

    The construction industry’s outdated foundation

    The construction industry is as outdated as an industry can get. Most construction firms spend less than 2% of their sales on IT — leaving them lagging far behind other industries and unprepared for the pandemic.

    Since COVID, 40% of firms reported higher costs and slower project completion. Poor communication, errors from manual data entry, shortage in skilled labor and high certification times cost the industry billions.

    In order to increase productivity and reduce costs, construction companies are finally adopting technology and Procore wants to be at the front of it.

    The tech company that could benefit from Biden’s infrastructure bill

    Let’s take a look at Procore’s numbers:

    • $400m in sales — up 38% from $289.2m in 2019.
    • $96m in net loss — up from a loss of $83.1m in 2019.
    • $8b in expected valuation when it goes public — nearly double its last private valuation.

    In other words, high growth, but largely unprofitable.

    Procore hopes investors will look past its current unprofitability and bet on its growth potential – and the timing couldn’t be better. President Biden is pushing for a $2.3t infrastructure through congress. If it passes, the number of construction projects could skyrocket.

    But recovery for the industry could take time. After the 2008 financial crisis, it took 5-years for construction volume to recover — and even longer for the number of construction jobs.

    If the timeline follows prior recessions, it may be a while before Procore can capitalize on the effects of the bill.

    Procore IPO: It’s a challenging time to go public

    The IPO market may be cooling down after global IPO volume increased 85% in the 1st quarter. At least two companies delayed listing in the past month due to market volatility:

    • Hear.com, a hearing-aid service provider, cited challenging equity market conditions.
    • Enact Holdings, a mortgage insurance provider, cited trading volatility in the mortgage insurance sector.

    Companies that have gone public in recent months haven’t done well either…

    • Honest Company ($HNST) is down 31% since its IPO on May 7th
    • Squarespace ($SQSP) fell 10% after its IPO yesterday

    A choppy market could delay more companies from going public until we find a concrete footing.

    Learn more: How long should you wait until you invest in a company that goes public? 

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