GoDaddy Surges in Trading Debut After $460 Million Share SaleBrian Womack and Leslie Picker
GoDaddy Inc. gained in its trading debut, after the company raised $460 million in a larger-than-expected initial public offering.
Shares of the 18-year-old company, which provides Internet domain-name registration and hosting services, rose 31 percent to $26.15 at 4 p.m. in New York. GoDaddy sold 23 million shares for $20 each, after offering 22 million for as much as $19. At the IPO price GoDaddy had a market value of just more than $3 billion.
GoDaddy’s pitch to investors is that its customer base of small businesses seeking new websites will keep growing. Revenue grew 23 percent in 2014, which was faster than rivals Endurance International Group Holdings Inc. and Germany’s United Internet AG.
“Most small businesses have fewer than five employees, and most small-business owners identify themselves as having little to no technology skills,” the company said in its IPO filing. “Our addressable market extends beyond small businesses and includes individuals and organizations, such as universities, charities and hobbyists.”
GoDaddy is backed by private-equity firms KKR & Co., Silver Lake Management and Technology Crossover Ventures which acquired a majority stake in 2011.
The firms put $859 million of equity in the purchase, according to Moody’s Investors Service. At the close Wednesday, the firms showed about a 195 percent unrealized gain on their investment. The gain included a dividend they received last year.
GoDaddy said in a regulatory filing that the three firms and Bob Parsons, founder and former chairman of GoDaddy, planned to buy up to $50 million of Class A shares in conjunction with the IPO.
The Scottsdale, Arizona-based company was founded in 1997 by Bob Parsons and raised its profile through Super Bowl commercials it started showing eight years later. The company’s advertising campaigns have featured celebrities including race-car driver Danica Patrick and Israeli model Bar Refaeli.
Some of those campaigns have been criticized by women’s advocates as being tasteless. The company says that marketing has helped increase name recognition among consumers and will continue.
“We have invested, and expect to continue to invest, substantial resources to increase our brand awareness,” the company said in its IPO prospectus.
GoDaddy has almost 13 million customers, the document shows, and generates revenue from subscriptions of domain and hosting products. Sales jumped 23 percent last year to $1.39 billion. The net loss was $143 million in 2014.
At a $3 billion valuation, GoDaddy was trading at around 2.2 times those sales. Endurance trades at about 4 times sales, while United Internet is fetching closer to 3 times, data compiled by Bloomberg show.
Still, the company faces challenges as technology changes, and consumers find new ways to track down online content. While users may have typed in website names on their desktop browsers in the past, today they’re likely to pick up their smartphones and find online information directly from applications.
“These evolving technologies and changes in customer behavior may have an adverse effect on our business and prospects,” the company said in a filing.
GoDaddy also is grappling with more competition. Google Inc. said last year it was testing a service that lets people use the Internet to find and register domain names. Other competitors for GoDaddy’s product lineup include larger companies such as Amazon.com Inc. and Microsoft Corp.
GoDaddy, which still primarily helps small companies get domain names, has been investing in other lines such as hosting customers’ sites. The company had about 13 million customers at the end of last year, up from 8 million at the end of 2010, the filing said.
Opportunities continue to grow, GoDaddy said in the filing. More than 50 percent of small businesses in the U.S. didn’t have websites as of early 2013, according to a study by Beall Research that was commissioned by GoDaddy.