Sponsor-backed web-hosting and domain registration company GoDaddy brought some late cheer to an otherwise slow quarter for primary issuance by pricing its IPO above range and upsizing the deal slightly.
GoDaddy raised gross proceeds of US$460m by pricing 23m primary shares, up from 22m at launch, at US$20 a share, above the US$17-$19 marketing range. Though some observers had dismissed GoDaddy as “Web 1.0” and facing steep competition, investors stormed the deal after a strong roadshow that highlighted the company’s solid cashflow profile, well-known brand and new management.
The deal was at least 10x oversubscribed, market sources said, while bankers said the deal was a “no-brainer” for investors seeking alpha-generating opportunities amid a current dearth of tech IPOs.
Debuting on the NYSE Wednesday, GoDaddy opened at US$26.15 for an immediate 31% gain, trading as high as US$26.84 in the early going. Racing car driver Danica Patrick, who is sponsored by GoDaddy and appears in its advertising, attended the opening.
Morgan Stanley, JP Morgan and Citigroup led the offering, closing the books a day early late Monday to give them more time to sort through allocations.
Proceeds will be used to repay debt, which expanded when GoDaddy’s board authorized a US$350m special distribution to existing owners, including private equity firms KKR, Silver Lake, Technology Crossover Ventures (who first invested in 2011) and founder Bob Parsons. This was funded through a refinancing that expanded GoDaddy’s term loan facility to US$1.1bn from US$750m.
GoDaddy becomes a publicly traded company with US$1.4bn of long-term debt, falling to US$1.1bn with the IPO proceeds. The company reported adjusted Ebitda of US$271.5m last year.
Still, GoDaddy is loss-making at the operating level (before taking into account interest expense) and the bottom line. GoDaddy made an operating loss of US$61.9m last year, though this was far less than its US$131.9m operating loss in 2013 and US$202.5m loss in 2012. Net losses, including interest expenses, were US$142.3m last year.
Well known for its controversial Super Bowl commercials, GoDaddy is the largest domain registrar in the world with 21% marketshare, or 59m domains under management. It has 12.7m customers that generated US$1.4bn of revenue last year and a five-year CAGR of 17%.
GoDaddy’s chief executive since January 2013, Blake Irving, is a former Yahoo! and Microsoft executive. GoDaddy has a partnership with the latter, and even managed to get new Microsoft chief executive Satya Nadella to appear in the IPO roadshow presentation.
There were only three other tech IPOs in the first quarter, those being Inovalon, Box and MaxPoint Interactive. Bankers expect the number of tech IPOs to pick up though vibrant private funding market have enabled some big-name tech companies to defer plans to go public.
