Is Apex Technology Merging With AvePoint Too Soon?

Stock Market

AvePoint Inc. reported preliminary first quarter 2021 results on April 14. The largest data management solutions provider for Microsoft 365 is set to merge with special purpose acquisition company (SPAC) Apex Technology Acquisition (NASDAQ:APXT). Once the merger is complete, APXT stock will change to AVPT, but remain on the same exchange.

Source: Dmitry Demidovich/

Ironically, Microsoft (NASDAQ:MSFT) co-founder Bill Gates told CNBC listeners in early April that companies have flipped from waiting too long to go public to not waiting long enough. 

Is AvePoint such a company? A look at its latest preliminary results suggests it’s not going public too early. Here’s why. 

AvePoint’s Been Around

AvePoint’s Executive Chairman Kai Gong and CEO TJ Jiang co-founded the company in 2001. The duo developed DocAve for Microsoft SharePoint. They coded the program in a New Jersey library, making little to no money for the first three years. 

Over the next 20 years, AvePoint developed more than 40 solutions for Microsoft Office 365 and SharePoint platforms. If you’re interested in the company, you ought to read this 2018 interview with Dr. Jiang. It will tell you all you need to know about what the company does to make a buck.  

Interestingly, Jiang was a software developer for big banks before co-founding AvePoint. His office was  on the 40th floor of the north tower of the World Trade Center. His survival taught him that life was too short, and that we need to follow our passions.

In Jiang’s case, it was doing something entrepreneurial, such as founding a software-as-a-service (SaaS) business. Twenty years later, he’s still at it.

It’s a great story. It demonstrates that AvePoint’s leader has been around the block and back, and understands how the tech sector works.

So, the fact I’m questioning its quest to go public probably will be seen by some as a slight against the company. But I don’t happen to see it that way.

What Do the Numbers Say About APXT Stock?

The company’s April 14 press release says that AvePoint’s total annual recurring revenue (ARR) will be between $128 million and $129.2 million for the 12 months ended March 31. Its ARR in Q1 2021 grew 32.6% year-over-year at the midpoint. 

Considering it had little to no revenue until 2004, building to $128 million in ARR seems to be a reasonable accomplishment for the two founders. 

By going to market at this point, patient investors such as Goldman Sachs (NYSE:GS), who first invested in the company in 2014, will be able to exit their investments after seven years, which is about the average holding period for venture capital (VC) investors. 

Clearly, everyone involved with AvePoint saw the SPAC phenomenon as an opportunity that might not come along again for a very long time.

According to InvestorPlace’s Matt McCall, at $11 a share, AvePoint has a market value of $2.19 billion and an enterprise value of $1.94 billion. Based on projected 2021 and 2022 revenue of $193 million and $257 million, respectively, AvePoint is being valued at 7.5x 2022 sales. 

As my colleague points out, that’s hardly expensive relative to other SaaS players that trade at much higher multiples. 

For example, Coupa Software (NASDAQ:COUP) had an operating loss of $166.6 million in fiscal 2021 on $541.6 million in sales. It’s currently valued at 22 times next year’s revenue estimate of $847 million.     

APXT Stock: The Bottom Line

Honestly, when I started this article — I’ve never written about APXT stock before — I was hell-bent on proving that Apex Technology was just another SPAC taking a target public too quickly. 

It’s especially ironic, given AvePoint is tied at the hip to Microsoft, Bill Gates’ legacy. 

However, the more I look at its business, the history of its founders, and their struggles, I’m not sure what else they would learn by remaining a private company. 

With revenues growing at a 30%+ pace and profits mere quarters away, I think the timing’s actually quite good. 

AvePoint is one tech stock I’ll be keeping an eye on once the merger is official. It’s got an excellent future. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.