Shares of data center provider Switch (SWCH) shot up 44 percent at one point this morning, shortly after they started trading on the New York Stock Exchange for the first time in the year’s largest tech IPO since the debut of Snap in March.
Las Vegas-based Switch priced its shares at $17 per share Thursday (above the previously expected $14-$16 per share), raising $531 million and valuing the business at $5.4 billion. Snap’s IPO valued maker of the popular social networking platform Snapchat at $24 billion.
While they’re both considered technology companies, Snap and Switch are in radically different businesses. Snap is a software company, whose growth depends on its ability to attract users to its platform, while Switch’s success depends on demand for data center space by companies like Amazon, which provides the infrastructure applications like Snapchat run on.
Switch lists Amazon as one of its customers, and Snap earlier this year signed a five-year, $1 billion contract with Amazon Web Services. The more contracts like that Amazon signs, the more it will need services like Switch’s.
Find a lot more in our in-depth DCK Investor Edge series on the Switch IPO:
Switch’s largest customer, the company that contributes the biggest portion of its annual revenue, is eBay. But Switch isn’t the only data center provider for eBay, Amazon, and others. Tech companies of that scale typically lease data centers from multiple providers (in addition to building their own), and competition for those leases is fierce.
With its IPO, Switch joins the short list of US-based publicly traded data center providers who compete for those deals with each other. Also on the list are Digital Realty Trust, CoreSite, CyrusOne, QTS, Equinix, and Iron Mountain (although data center services are one of several businesses Iron Mountain is in).
While the initial 44 percent spike was short lived, Switch’s shares continued trading well above the opening price into the afternoon Eastern Time, trading at $22.04 (up 30 percent) around 1:30 pm.
eBay and its affiliates accounted for 13 percent of Switch’s 2016 revenue, which was $318.4 million.
The company’s 2013 revenue was $166.8 million, meaning its compound annual growth rate has been 24 percent over the last three years.
Switch reported $31.4 million in net income for 2016 and $73.5 million in 2015. Its 2015 revenue was $265.9 million.