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JFrog share price: What’s the outlook following the $393 million IPO?

We examine JFrog’s IPO performance, its growth strategies moving forward as well as expected use of the fund raised through the IPO.

JFrog share price remains elevated following IPO

As with a number of other high profile initial public offerings (IPO) that have launched over the last week – including Snowflake and Unity Software – JFrog’s listing proved immensely popular.

JFrog – which helps companies and developers roll out software updates – has risen to prominence over the last few years, attracting a suite of high-profile clients that include American Express, Adobe, Amazon, Netflix and Adidas.

As part of the IPO process, JFrog issued ~13.3 million ordinary shares, at an IPO price of $44.00 per share, raising approximately $393 million in the process. For reference, JFrog was initially targeting an IPO price of between $33-37 per share.

In spite of raising the IPO issue price – the JFrog share price surged when it hit the public markets, being bid up to $77.00 per share within the first hour of trade.

Though the stock has drifted lower since that day one euphoria, it continues to trade well above its IPO issue price, finishing out yesterday’s session at $67.00 per share – implying a market capitalisation of $5.74 billion.

The outlook: An $18 billion growth opportunity

Despite that strong showing, JFrog remains focused on growth, with management highlighting four key target growth areas, including: acquiring new customers, improving its technology partnership ecosystem, building upon its current technology leadership, and growing its current customer base.

That last point may potentially prove most significant, with management flagging that thus far, JFrog has not made use of a ‘significant’ outbound sales team. Despite that, JFrog boasts an impressive net dollar retention rate – coming in at 133% in Q2 FY20, slightly down on a PCP basis – an outcome attributed to the coronavirus.

‘Moving forward, we are building a small, high-touch strategic sales team to identify new use cases and drive expansion and standardization on JFrog within our largest customers,’ the company said in the IPO prospectus.

Elsewhere, quantifying JFrog’s growth opportunity, the IDC estimates that the total market opportunity for DevOps tools could reach $18 billion by 2024. For the six months ending 30 June, the company recorded revenues of $69.25 million.

Use of the IPO funds

Overall, JFrog provided a relatively vague description of what it intended to use the $393 million in funds raised from the IPO for, noting that a portion of the funds would be used for general corporate purposes, as well as potentially to make acquisitions or invest in businesses, products, services or technologies. The company however did make clear that at this time it had in place no agreements or commitments for any ‘material’ investments.

‘The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our ordinary shares and thereby enable access to the public equity markets for us and our shareholders, and to increase our visibility in the marketplace,’ JFrog said in its IPO prospectus.

JFrog trades under the ticker ‘FROG’.

How to trade JFrog long or short…

What do you make of the reaction to JFrog’s IPO: Are you bullish or bearish on its short or long-term prospects? Whatever your view, you can use CFDs to trade both rising and falling markets, through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) JFrog using CFDs, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘FROG’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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