The GoDaddy IPO – Go big or go home?
01:00, 30 mars 2015
· Av CMC Markets
23 million GoDaddy shares have been priced at $20 for the IPO set for April 1st raising $460m, above the stated 22 million on offer at a price range of $17-$19.
The IPO deserves some attention given the size of the offering, strong investor demand within the tech sector and GoDaddy’s prominent position in the web-hosting industry.
The GoDaddy model has been to discount domain registration to upsell its other services such as hosting, website-building, online shopping-cart tools and SEO marketing. It has also historically had a huge advertising budget allowing it to regularly put-out its memorable Super Bowl adverts.
Discounting domains and flashy ads have helped brand-notoriety and revenues but profits have been few and far between for GoDaddy. Last year the company saw an operating loss of $62m which burgeoned to $143m when including the interest on its large debt-pile.
There is positive news on the debt since the proceeds of the IPO will go towards paying off $300m in debt which currently stands at $1.5bn. The trouble is that the debt has ballooned in the last year so because the bulk of IPO proceeds are going towards debt-repayment, should GoDaddy wish to further invest in growth, it will need to tap debt markets again.
What some have deemed GoDaddy’s “sexist” Super Bowl ads have arguably backfired after this year’s attempt at a Budweiser parody had to be pulled because of viewer complaints it promoted animal cruelty.
The way websites are constructed and used is ever-evolving and there is some evidence that recent trends may leave GoDaddy behind the curve. There are many sites that offer free domains and hosting, notably CMS sites such as WordPress, Joomla and Drupal and not forgetting Facebook pages which most individuals and many businesses prefer, aware of the importance of communication through social media.
The history of web-hosting IPO’s doesn’t offer a favourable backdrop for GoDaddy’s attempt. Box.com, the cloud storage service is below its IPO price from the end of January this year and Web.com shares which listed back in 2005 have fallen by as much as 60% in the last twelve months.
GoDaddy has substantial gravitas within its industry and name-recognition could attract above-average retail investor demand on its IPO but an industry on the decline, the multi-year losses and questionable path to future profits are big hurdles to leap.
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