IPO Launch: Amesite Aims To Raise $15 Million In IPO


Amesite (AMST) has filed to raise $15.5 million in an IPO of its common stock, according to an S-1 registration statement.

The firm designs online education courses for businesses and schools using machine learning techniques.

AMST hasn’t demonstrated meaningful revenue indicating at least product market fit and the valuation management is asking investors to pay is high.

Detroit, Michigan-based Amesite was founded to design mass customized education courses that are responsive to learner dynamics via its machine learning system.

Management is headed by president, Chairman and CEO Ann Marie Sastry, Ph.D., who has been with the firm since November 2017 and was previously president and CEO of Sakti3, a lithium-ion battery technology company.

Below is a brief overview video of CEO Sastry and how AI is affecting education:

Source: Amesite

The company provides training resources for businesses, a full featured learning platform for K-12 schools and colleges.

Amesite has received at least $11.6 million from investors including CEO Sastry (38.3% pre-IPO) and Mark Tompkins (17.87%).

The company has been selling directly to prospects via a direct sales force.

Management also intends to 'develop a branding strategy to introduce and support our platform.'

Sales & Marketing expenses as a percentage of total revenue have been extremely high and rising as revenues have increased

The Sales & Marketing efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Sales & Marketing spend, was 0.1x in the most recent reporting period.

According to a 2020 market research report by Technavio, the U.S. market for e-learning is forecast to grow by over $21 billion from 2020 to 2024.

This represents a forecast CAGR of 9.8% from 2020 to 2024

The main drivers for this expected growth are increased consumer demand for more cost-efficient and time-flexible learning programs available on multiple devices rather than having to go to a physical classroom.

Also, the high adoption of mobile devices and the reduction in the cost of Internet bandwidth makes the entry cost for consumers lower than in previous years.

Major competitive or other industry participants include:

  • Adobe (ADBE)
  • Cengage Learning (CNGO)
  • D2L
  • Houghton Mifflin Harcourt (HMHC)
  • Instructure (INST)
  • John Wiley & Sons (JW.A)
  • McGraw-Hill Education (MHED)
  • Pearson Plc (PSO)

Amesite’s recent financial results can be summarized as follows:

  • Growing topline revenue, but from a tiny base
  • High operating losses as a percentage of revenue
  • Continued cash used in operations

Below are relevant financial results derived from the firm’s registration statement:


Source: Company registration statement

As of June 30, 2020, Amesite had $4.1 million in cash and $2.7 million in total liabilities.

Free cash flow during the twelve months ended June 30, 2020, was ($2.8 million).

Amesite intends to raise $15.5 million in gross proceeds from an IPO of its common stock.

No existing shareholders have indicated an interest to purchase shares at the IPO price.

Assuming a successful IPO, the company’s enterprise value at IPO would approximate $98 million, excluding the effects of underwriter over-allotment options.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 15.18%.

Management says it will use the net proceeds from the IPO as follows:

We will allocate the gross proceeds from the Offering to product development, marketing and working capital and general corporate purposes. Additionally, we may use a portion of the proceeds to us for acquisitions of complementary businesses, technologies, or other assets. However, we have no commitments to use the proceeds from this Offering for any such acquisitions or investments at this time.

Management’s presentation of the company roadshow is available here.

The sole listed bookrunner of the IPO is Laidlaw & Company (UK).


Amesite is seeking public investment to fund its continued production development and its sales & marketing expansion plans.

The firm’s financials show that it has generated negligible revenue despite being ‘in the market’ for two full years, which is concerning.

Sales & Marketing expenses have outstripped revenue by a high margin as the firm’s sales ramp has been slow; its Sales & Marketing efficiency rate is a low 0.1x.

The market opportunity for online education is extremely large and likely to grow at a substantial rate over the coming years, especially in the wake of the Covid-19 pandemic, so the firm has strong industry dynamics in its favor.

Laidlaw (UK) is the sole underwriter and there is no data on IPOs led by the firm over the last 12-month period.

As to valuation, management is asking IPO investors to pay a sky high multiple of its revenue, which doesn’t make sense to me.

If management can’t show at least one or two quarters of a strong revenue ramp, then my view is to wait until it can demonstrate its ability to generate real sales.

Expected IPO Pricing Date: To be announced.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)


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