What happened
Shares of Cloudflare (NET +3.50%) have surged today, up by 23% as of 2:30 p.m. EDT. The cloud and cybersecurity company priced its IPO last night at $15.
So what
At the $15 offering price, Cloudflare fetched a valuation of $4.4 billion, which has climbed even higher on the first day of trading. After underwriting discounts and commissions, the net proceeds to Cloudflare are expected to be approximately $491.1 million after selling 35 million shares, and the deal's underwriters have options to purchase an additional 5.25 million shares.
Image source: Getty Images.
Cloudflare initially expected the offering to price at $10 to $12, a range that was subsequently raised to $12 to $14. Considering the fact that the offering priced higher than expected, combined with today's pop, it seems investor demand for the offering remains robust, making it probable that the underwriters will exercise those options.
Now what
If the underwriters exercise their options in full, Cloudflare's net proceeds will end up closer to $565.5 million, according to the prospectus. The company says it intends to use the net proceeds for general corporate purposes. It may also use the money for acquisitions, but it said it has no current agreements or commitments for any "material acquisitions at this time."
It's jumping into the public markets at a precarious time. Many cloud stocks took a beating on Monday, and many high-profile tech unicorns that have gone public over the past two years have severely underperformed the broader market. Public investors' appetite for growth at all costs may be waning. And Cloudflare's net loss ballooned to $87.2 million in 2018, up from $10.7 million in 2017.
