GoDaddy Joins GoPro in the Race to Go IPO
August 06, 2014
By Marc Fogarty, CPA, CFE
GoDaddy is joining the ranks of other high profile tech companies looking for an IPO to raise capital. GoDaddy, a website hosting and domain registration company, is planning an IPO of $100M or more, but the company has not made a profit since 2009. In fact, they have had substantial losses in the past few years including an approximate $200million loss last year.
The GoDaddy IPO is a classic example of a company looking to raise capital to pay off debt so it can grow the business. It might be an opportune time for GoDaddy to jump on the bandwagon because tech company valuations are high and the tech IPO market is making a comeback. But how much will they raise and how much do they need to pay off? New investors generally don't like a situation where a company needs to pay off debt before they can see growth. Participating in the GoDaddy IPO would be a long term investment.
On the positive side for investors, GoDaddy currently reports steady growth with an expanding customer base of approximately 13% per year. The customer base is reported to be about 12M, which seems low compared to the number of potential customers. This could give them plenty of room for growth. There is also potential growth if they gain the ability to sell new top-level domain names, such as ".nyc," which might get approved by the Internet Corporation for Assigned Names and Numbers (ICAAN).
An IPO can work in GoDaddy’s favor by raising significant capital. However, GoDaddy is not dealing with new technology; nor is it revolutionary or enhancing the technology or commerce landscape. The company itself has not made any major changes. If that continues, then they are solely banking on the continued growth of the Internet and its viable future business.
The most notable thing GoDaddy will need to change is their marketing. They are known for their ‘racy’ ads, in especially large advertising venues such as the Super Bowl. My guess is that they will need to beef up their marketing efforts if they want to continue to grow. It is one thing to answer to a few private equity firms; it is another to answer those growth questions to the investing public.