IPO Watch: Pure Storage Flops Despite Big Hype

(RTTNews) - Shares of Pure Storage Inc. (PSTG) did not live up to expectations and tumbled on the opening day of trading following the data storage company's initial public offering.

Pure Storage had priced its IPO of 25 million shares of its Class A common stock at $17 per share, in the middle of its targeted range. But its shares closed Wednesday's debut trading at $16.01, almost $1 lower.

The 5.8 percent decline in its share price pushed the company's market valuation to below its valuation of $3 billion as a private company.

Mountain View, California-based Pure Storage is a so-called tech unicorn, meaning it is a start-up company whose valuation has exceeded $1 billion.

The company's stock market debut was keenly watched by analysts, but the lackluster debut has raised concerns that it may have a negative impact on large venture-capital valuations.

However, the company's CEO Scott Dietzen said the company did not worry about market conditions despite a lackluster year for tech stocks and that it was ready to be a public company.

Pure Storage is a maker of all-flash storage products. Despite flash storage being more expensive, customers are increasingly replacing traditional disk-based systems with all-flash storage as they are typically much faster.

The spend on all-flash solutions is expected to grow to $3.3 billion in 2018 from $1.3 billion in 2014, representing a 26.6 percent compounded annual growth rate. Since launching its modular and scalable all-flash array hardware FlashArray in May 2012, Pure Storage's customer base has grown to over 1,100 customers.

However, the company, which counts LinkedIn Corp., ConocoPhillips and Nielsen as its customers, has not achieved profitability for any fiscal year since its inception in October 2009.