Switch Sets IPO Price above Range at $17

Switch Inc’s initial public offering which was priced at $17 raised about $531.3, granting it its position of being the second-largest U.S. technology this year.

The data center operator went public on Friday as the latest tech firm using special shared to limit the rights of minority investors. This restricts it for inclusion in the S&P 500 under new terms meant to prevent such practices.

Switch Inc. rents out its cloud service infrastructure to major customers who include Amazon.com Inc., eBay, and PayPal Inc. which helps to manage their data on a contractual basis.

The $31.3 million Class A share offering gave it a market value of as much as $4.2 billion as the offering was priced above the proposed $14 to $16 per share range.

Las Vegas-based Switch Inc. posted net income of $35.3 million for the six months ended June 30, compared with the year-ago period, the numbers fell flat. The company also operates data centers in Michigan and Reno, Nevada.

According to a source close to the IPO, the deal was oversubscribed on Wednesday and underwriters closed their order book late. Among these top underwriters were Goldman Sachs & Co., J.P.Morgan, BMO Capital Markets, and Wells Fargo Securities.

Rob Roy, founder and CEO of Switch Inc. had been less known in the industry, making investors hesitant in taking greater risk on a company which they will have little say. Whereas, Snap co-founder Evan Spiegel was well known to Wall Street and had investors betting on his talent.

“Investors do look at voting control as well as the price you pay. If you put so much stock in the CEO, normally he’s going to part of the sales pitch for the company,” stated Ken Bertsch, Executive Director of the Council of Institutional Investors, who also represents top U.S. pension funds.

New Front-runner in the Stock Index

Young companies refer to their inclusion in the stock index as a milestone, bringing their shares into many passive funds and others that follow closely with indexes like the S&P 500. Software seller Mulesoft’s IPO included a share class with 10 votes per share in February, as well as Blue Apron in its June debut.

There are companies excluded from major indexes under their new terms including video streaming company Roku Inc, who kept 97% of voting power with insiders on its IPO last week.

In the recent years, about 15% of U.S. IPOs have used dual share classes meant to provide insiders outsized voting rights, the Council of Institutional Investors.

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