Technology

Switch to Raise up to $500 Million From IPO

The data center company's offering would be the third-largest of the year in the tech sector behind Snap and Altice.
Matthew HellerSeptember 25, 2017

In what would be the third-largest tech IPO of the year, data center operator Switch said Monday it plans to raise up to $500 million by going public.

According to a revised prospectus, Switch’s IPO, initially filed earlier this month, is expected to price between $14 and $16 a share. At the midpoint of $15 a share, the sale of 31.25 million shares of Class A common stock would raise about $438.5 million, after underwriting discounts and other expenses.

Including options granted to underwriters to buy additional shares, the proceeds for Switch could be up to $575 million.

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At $16 a share, the company would be valued at $16 billion. The offering would be the third largest of the year in the tech sector behind Snap ($3.9 billion) and Altice USA ($2.2 billion).

Switch, which was founded in 2000, booked $345 million in sales for the 12 months ended June 30, 2017, up 20% from $266 million the previous year. It is one of the world’s largest operators of data-center campuses and its 800 customers include Amazon, EBay, DreamWorks, News Corp., eHarmony, and Cisco.

EBay, its largest customer, accounted for 9.6% of its revenues between January and June 30 this year. Ninety-five percent of revenue comes from Las Vegas, where Switch has its flagship campus.

“Our patented data center designs have redefined traditional data center space and cooling, allowing our customers to achieve significantly higher power densities than may be available in traditional data centers,” the prospectus said.

According to 451 Research, global data center colocation spending is expected to grow at a 12% compound annual rate from $29.7 billion in 2016 to $47.4 billion in 2020. “Service provider data centers are only beginning to penetrate the data center market,” Switch noted.

“The Switch IPO gives investors another opportunity to invest in a smaller-cap, growth oriented, colocation, and wholesale data center operator,” DataCenter Knowledge said, adding that Switch provides both super-wholesale and retail colocation and interconnection options, setting it apart from competitor DuPont Fabros.

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