A GoDaddy IPO price range of $17 to $19 was set this morning (Thursday), as the company prepares to sell 22 million shares.
At the high point of that range, the GoDaddy Inc. (NYSE: GDDY) IPO will raise approximately $418 million. GoDaddy will be valued at roughly $2.87 billion following the IPO.
GoDaddy will be listed on the New York Stock Exchange under the ticker "GDDY." No date has been set for the stock debut.
But investors looking to buy when it debuts - read this first...
Who Is GoDaddy?
The company is a web-domain service with more than 12.7 million customers. It also manages more than 57 million domain names. That domain business has been the company's hallmark since it was founded in 1997.
But it's best known for its marketing campaigns. High-profile spots during the Super Bowl and other major sporting events typically feature scantily clad models. The company has also sponsored NASCAR driver Danica Patrick.
GoDaddy initially filed for its IPO in June and set a placeholder value of $100 million on the deal. The consensus at the time was that GoDaddy would be valued closer to $4.5 billion.
In 2014, GoDaddy's revenue climbed 22.7% to $1.4 billion.
But those improving financial numbers and flashy advertisements are not buy signals for GoDaddy stock.
In fact, there are three major reasons why we're avoiding it following the GoDaddy IPO...
GoDaddy IPO Price - Too High
The first major red flag is GoDaddy's profitability.
GDDY lost $143.3 million in 2014. Yes, that's an improvement from the $199.9 million it lost in 2013 and the $279.3 million in 2012. But this isn't a new company either. It has been on the market for 18 years and is still not making a profit.
The second reason to avoid GDDY stock is its increasing competition...
Just weeks after the GoDaddy IPO was filed, Google Inc. (Nasdaq: GOOG, GOOGL) announced it would enter the web domain business with "Google Domains." The service allows businesses to search, find, purchase, and transfer domain names.
GoDaddy also competes with smaller companies like Endurance, United Internet, and Network Solutions. But Google is the biggest fear for GoDaddy moving forward.
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GoDaddy even admitted how worrisome the competition is in its IPO prospectus.
"Some of our current and potential competitors have greater resources, more brand recognition and consumer awareness, more diversified product offerings, greater international scope and larger customer bases than we do," the company wrote.
The third reason to avoid GoDaddy stock is the nature of the IPO market right now.
At Money Morning, we recommend investors avoid stocks immediately following IPOs. Only wealthy, institutional investors will be able to buy in at the GoDaddy IPO price.
Retail investors will only be able to buy in once GDDY stock hits the market. And if the stock opens much higher, investors will be paying a premium for the stock. And because IPO stocks are so volatile, that often means major losses for retail investors.
Take the Box Inc. (NYSE: BOX) IPO from January. The company set an offer price of $14. It opened its first day of trading at $20.20, before reaching a high of $24.73. That's the highest value the stock has seen.
Box stock opened at $17 on March 19. Investors who bought in at the first-day opening price are looking at a loss of 15.8%. Those who bought in at the first-day high have lost 31.3%.
They operate under different guidelines, but generally, each ETF buys a stock in the days following its initial public offering and holds it for a specified amount of time. This allows the investor to avoid any initial volatility and capture the profits from the stocks first few months or years.
Granted, one-day triple-digit gains are rare with these ETFs, but so too are major losses.
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