Twilio Inc. (NYSE: TWLO) was one of the best initial public offerings we have seen in some time. Shares had risen as high as almost $71.00 after the IPO was at $15.00 per share in June. After huge gains, it is not unusual to see shareholders and insiders wanting to take some cash home. Now some investors are going to have to consider if this 7 million share underwritten secondary offering at $40.00 per share came at a fair price.

One issue to consider is who is selling the shares. The overwhelming majority of the offering, more than 6.3 million shares, was made up of shares being sold by backers and insiders. The company sold only 641,222 shares in the offering. There was a rather large underwriting group seen for this offering: Goldman Sachs, JPMorgan, Allen, UBS, Pacific Crest, JMP Securities, William Blair and Canaccord Genuity.

Twilio is a communications platform as a service provider which enables developers to build and scale real-time communications inside of software applications. This allows its developers and customers to embed voice, video, messaging, and authentication into their applications. Its customer base numbered almost 31,000 customer accounts at the end of the second quarter.

It is not unusual for insiders and venture backers to want to take money off the table after big gains. It is also impossible to ignore that valuations are quite high. Twilio is not yet profitable, and its $3.5 billion market cap with a $42.00 share price is rather close to the consensus analyst price target of $39.67.

What should stand out here is that the consensus estimates from Thomson Reuters show revenues for 2016 projected to be almost $259 million. Thomson Reuters is also calling for a loss in 2016, and it doesn’t see an earnings per share profit until 2018 — and even then, the consensus estimate is a mere $0.06 per share with revenues of $445 million.

So, what investors have to digest is that we have a company trading at more than 13 times this year’s expected revenues and not expecting operating earnings per share until 2018.

After the IPO in June, shares of Twilio were trading under $30.00. By the end of September they were closer to $70.00, and now they are back to $42.00 or so.

So, back to if this was a fairly priced secondary offering. Pricing a deal like this is no simple task. After all, this stock was only above $70.00 for one day and trading volume that day and the prior day were higher than normal.

As of 1:00 p.m. Eastern Time on Friday, Twilio had already traded 15 million shares in a single day and the $42.00 share price was down 5% from the prior day. 24/7 Wall St. wanted to compare today’s trading volume to other days:

• The highest volume day in June was its June 23 IPO at 21.29 million shares.
• Twilio’s next highest volume day was 18.5 million shares on June 30.
• It did not have major volume like that again until 22 million shares traded on August 15 when shares closed up over $5.00 at $58.47; and the following day’s volume was 12.27 million shares with a $59.34 close.
• Twilio’s trading volume was 6,732,520 shares on the September 28 day that the shares peaked above $70.00.

Stay tuned.

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