Market Overview

Will Switch Turn Investors On With Its IPO?

Will Switch Turn Investors On With Its IPO?

Investors will soon be treated with the third largest technology related initial public offering, Bloomberg reported. Switch Inc., a data center company, will be selling 31.25 million shares of its own stock at a price of $14 to $16 per share. The high end of the offering would value the "unicorn" at around $4 billion.

Switch will trade on the New York Stock Exchange under the ticker "SWCH."

IPOs in 2017 have been mixed: most notably, investors were not impressed with Blue Apron Holdings Inc (NYSE: APRN)'s offerings and also Snap Inc (NYSE: SNAP). Roku Inc (NASDAQ: ROKU)'s IPO got off to a strong start, but the stock has pulled back after peaking at $29.80.

Switch reported a net income of $31.4 million on revenue of $318.4 million, according to Bloomberg. This marks a decrease in net income from 2015's level of $73.5 million, but revenue did improve from $265.9 million.

Switch's business profile is similar to other publicly traded data center REITs, Seeking Alpha's Bill Stoller said. The company boasts three campuses that account for more than 4 million square feet of data center space and plans to expand its footprint to 12 million square feet.

The company boasts 800 customers, the biggest of which is eBay Inc (NASDAQ: EBAY). The online auction company accounts for nearly 10 percent of Switch's total revenue, Stoller said. The company's top 10 customers comprise 38.4 percent and 38.1 percent of total revenues for 2016 as a whole and the first six months of 2017, respectively.

A heightened amount of M&A activity in the data center space bodes well for Switch's IPO prospects. Investors appear to be hungry for exposure to a sector that isn't dependent on GDP growth, employment, consumer spending or other macro factors to grow, Stoller said.

Related Links:

Blue Apron's IPO: What Went Wrong?

Analyst: Snap Investors Were Sold Snake Oil


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