TheChek News Flow

Earlier, GoDaddy (GDDY) priced its upsized 23 million share IPO at $20.00 per share, above the expected $17.00-19.00 expected range. The deal, which was originally for 22 million shares, will raise $460 million in gross proceeds.

For some background, GDDY is a leading internet domain company with roughly 13 million customers, primarily small and medium sized businesses, entrepreneurs, and hobbyists. The company was founded back in 1997 by Bob Parsons, so GDDY actually is a fairly mature company (as illustrated in its revenue growth rates, which are solid, but not exceptional).

In addition to domain name registration, GDDY also offers web design service, hosting, and security tools to help customers build and maintain on online marketplace. In fact, these services have become a much larger portion of the business over the past several years. To put that into context, in 2014, hosting, presence, and business applications products accounted for over 49% of aggregate bookings.

But still, since its inception, GDDY's "bread and butter" has been its domain name registration business. According to its prospectus, it has about 59 million domains under management, accounting for about 21% of all current internet domain names in the world. To go along with its market-leading domain name registration business, GDDY has accumulated a portfolio of 144 patents, with much of the protected technology related to domain names and web hosting. However, there is also a focus on search engine development and IT security.

The market opportunity is very substantial for GDDY. According to the U.S. Small Business Administration, there were approximately 28 million small businesses in 2012, with many of these businesses having fewer than five employees, and with many of them having little or no technological skills. Furthermore (and this stat is surprising, in this age), as of January 2013, more than half of small business in the U.S still did not have a website.

In regards to its FY14 results, revenue grew 23% to $1.39 billion, with the increase primarily resulting from a $179.4 million increase from new and existing customers and $52.4 million in incremental revenue from businesses acquired in 4Q13. Its domain business saw a 14% jump in revenue to $763.3 million and its hosting and presence business grew by 33% to $127.2 million.

Additionally, its operating loss improved to ($61.9) million from ($131.9) million as its cost of revenue, as a percentage of revenue, decreased to 37.4% from 41.9%. Marketing and advertising also improved, coming in at 11.9% of revenue versus 12.9% a year earlier.

As for its valuation, GDDY would have a market cap of $2.7 billion, based on the mid-point of the expected price range, equating to a reasonable, if not attractive, trailing P/S of 1.94
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