Apptio CEO Sunny Gupta
Apptio CEO Sunny Gupta

Is Apptio prepping for an IPO? No, the company says.

However, a memo sent to ex-employees by Apptio general counsel Todd Smith is getting lots of attention among current and former employees, sparking speculation about the company’s future plans.

The memo indicates a change in the company’s bylaws preventing stock sales or transfers of common stock acquired on or after July 14th. Experts in corporate law say such a step sometimes but not always indicates a company preparing to go public, or laying the groundwork to be sold.

“You may continue to exercise your options after July 14th, pursuant to the terms of your option agreement, but you will not be able to sell or otherwise transfer the stock received from such options,” Smith wrote in the email. “The restriction will end upon the occurrence of an IPO or further action by the Board.”

However, Apptio spokeswoman Erika Bitzer said that the change in bylaws does not indicate a pending IPO.

“We regularly review our practices at Apptio and this is just good housekeeping to protect the company and its employees,” Bitzer said via email.

The change could be a method for Apptio to prevent stock sales in secondary markets like Sharepost, which creates a market in which early shareholders in late-stage venture-backed companies can sell to outsiders.

Apptio may not want shares floating on those types of markets with an IPO or sale in the works, legal experts said.

We’ve discussed Apptio as a possible IPO candidate in the past, especially after the Bellevue company named former Microsoft CFO Peter Klein to its board and tapped former Amazon.com vice president of investor relations Sean Boyle as CFO. Apptio has raised $136 million in venture financing, including a $45 million round in May 2013. In the company’s 2012 venture financing round, Apptio commanded a valuation of $600 million — larger than some publicly-traded companies. (RealNetworks is valued at $277 million and Blue Nile is valued at $308 million, by comparison).

Last fall, CEO Sunny Gupta told GeekWire that he’s looking to build a long-lasting company in the Pacific Northwest, one that changes how CIOs run information technology departments.

“We’ll consider every option that sets us up for growth and longevity, but we don’t have any specific plans at this time,” he said.

Interestingly, Apptio may have already positioned itself to go public given new rules that allow companies to file documents with the SEC without disclosing key financial information to the public. It’s unclear whether that is the case in this situation. The company’s backers include Greylock, Madrona and Andreessen Horowitz.

Here’s the full memo that was sent by Smith.

To Certain Apptio Former Employees:

You are receiving this email because you may still possess vested options to buy Apptio stock and may be within the ninety day post-termination exercise window. This is to let you know of a policy change implemented by Apptio this week regarding the sale of Company stock. On July 14, 2014, pursuant to actions taken by the Board of Directors and the majority shareholders, the Company’s Bylaws were amended to prohibit transfers (including sales) of Company common stock acquired on or after July 14th. This includes any stock received from option exercises that occur on or after July 14th. You may continue to exercise your options after July 14th, pursuant to the terms of your option agreement, but you will not be able to sell or otherwise transfer the stock received from such options. The restriction will end upon the occurrence of an IPO or further action by the Board. This restriction does not apply to common stock (not options) already held by a shareholder prior to July 14th, 2014.

If you have any questions about this policy change, please feel free to contact me via email or the number below.

Todd W. Smith
General Counsel

Comments

  • lawyer

    This is pretty standard corporate housekeeping for later stage companies. Seems to happen when a company starts to have some former employees look to sell stock on Second Market or elsewhere after the price gets to high for the company to exercise rights of first refusal. Uber made a similar change a year ago, many others did it in varying forms after Facebook had a ton of stock hitting Second Market causing it to worry about backing into being a public company due to the 500 shareholder rules. It isn’t a leading indicator of an IPO, just that Apptio has started to get bigger, has been around for a while, its value is pretty high and has accumulated some former optionholders as shareholders. Interesting but not indicative of anything.

  • smurf

    I know a few former employees who sold their exercised options on the secondary market a couple years back. In one case an investor group slurped up enough like this in order to gain some access to the board of directors.

    I exercised my vested options a few years ago when I left the business and soon after declined an offer to purchase them from a secondary buyer. Occasionally I wonder if I missed an opportunity not selling.

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