Life360 shares jump 7% on Nasdaq IPO launch

US investors will soon be able to buy this market darling's shares on Wall Street.

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Life360 Inc (ASX: 360) shares are jumping on Tuesday morning.

At the time of writing, the location technology company's shares are up 7% to $16.28.

Why are Life360 shares jumping?

Investors have been buying the company's shares this morning in response to news that it has launched its Nasdaq initial public offering (IPO).

According to the release, Life360 estimates that it will receive net proceeds from this offering of approximately US$84.4 million, assuming an initial public offering price of US$30.43 per share, and after deducting the estimated underwriting discount and estimated offering expenses,

Management explained that the principal purposes of this offering are to increase its capitalisation and financial flexibility and create a public market for its common stock in the United States.

It currently intends to use the net proceeds received from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures.

It may also use a portion of the net proceeds for acquisitions or strategic investments in complementary businesses, products, services, or technologies. However, it does not currently have any agreements or commitments to enter into any such acquisitions or investments.

Once complete, the company expects to trade on Wall Street under the Life360 Inc (NASDAQ: LIF) ticker code.

Why would US investors buy into the company?

Life360 shares have been a popular and successful option for ASX investors since their listing. This has been driven by its rapid sales and earnings growth.

In respect to the former, Life360's subscription growth has grown from US$86.6 million in 2021 to US$220.8 million in 2023. It is currently guiding core subscription revenue growth of at least 20% in 2024.

The good news is that management believes it still has a significant market opportunity to grow into in the future, which would be appealing to investors on Wall Street. It highlights:

We are a market leader in family safety, connecting millions of people globally through software and hardware to the people, pets and things they care most about. We offer a range of services including location sharing, safe driver reports, and crash detection with emergency dispatch. The widespread proliferation and continued growth of connected devices has led to a normalization of location sharing for a wide range of consumer applications such as item tracking, communication, social coordination or travel.

The Life360 Platform is currently available in 171 countries through the Apple App Store and 133 countries through the Google Play Store through both tiered and single subscription offerings. We believe that the opportunity for our core subscription offerings alone translates into a TAM of US$75 billion. Our core subscription offering consists of a bundle of services that competes with a variety of single point solutions.

Is this listing good news for ASX investors?

The team at Bell Potter has previously stated its belief that the Wall Street listing would be good news for Life360 shares. It explained:

Key potential catalysts for the stock include another strong quarter of paying circle growth in Q2 (April was another good month), a potential upgrade to the 2024 guidance sometime in H2 and a US listing at some stage in the next 12 months.

We have increased the multiple we apply in the EV/Revenue valuation from 5.5x to 6.5x given the proposed US listing and potential re-rating of the stock given the much higher multiples of comps like Reddit (NYSE: RDDT).

Bell Potter currently has a buy rating and a $17.75 price target on its shares.

Motley Fool contributor James Mickleboro has positions in Life360. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Life360. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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