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Go, daddy, go: GoDaddy shares rocket 30% in value at IPO

So why are people warning against buying in?

GoDaddy has had a successful launch at the New Stock Exchange on Wednesday morning with shares jumping more than 30 per cent, valuing the company at around $6bn.

The company dominates the market for internet domain names with just over 30 per cent market share and offers a range of add-on services from security certificates to web hosting.

GoDaddy originally signaled it would price shares at between $17 and $19. In the end, it put them out at $20 and the first trades came in at $26.15. They hit a peak shortly after of $26.84 and appear to have settled after five hours of trading to around $26.30.

That would value the company at just over $6bn - a hugely successful result for the venture capital companies that bought into the company back in 2011 for $2.25bn.

However it is that buyout, and the fact that GoDaddy hasn't turned a profit since 2009, that is seeing financial analysts sound a cautious note.

The 2011 purchase by Kohlberg Kravis Roberts, Silver Lake and Technology Crossover Ventures was a leveraged buyout, meaning that GoDaddy sits on a mountain of debt - $1.5bn, in fact. One ratings agency, Rapid Ratings, gives the company a "health rating" of just 26 out of a 100 largely as a result of this debt burden.

GoDaddy lost $143m last year and $622m in the past three years. While the company claims it is confident that Google's move into the domain name space will not impact it too much, it did delay the IPO in order to see what the search giant was intending, indicating that it knows it is in a potentially weak position.

New gTLDs

What's more, GoDaddy is really hoping that the introduction of more than a 1,000 new internet extensions will see business greatly expand. But registration figures for new gTLDs have been well below market expectations, adding further uncertainty.

It is notable that of the many news reports written about the IPO this morning, almost none have mentioned that the huge internet expansion that GoDaddy is betting its future on.

It is also worth remembering that great first days do not mean continued success. Facebook famously rocketed on its IPO debut to $42.05 per share before slumping to $18 just three months later.

That said, GoDaddy remains in a very strong position in the domain name market - its sales are increasing, and no one imagines that the numbers of domain names and websites are going anywhere but up.

It will take a few months for the dust to settle but the company best known for its sexy Superbowl ads and having female racing driver Danica Patrick as the face of its campaigns has good reason to be happy today.

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