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Datadog leaps in trading debut after rebuffing Cisco

(Bloomberg) --Datadog Inc., a software company that bet it could do better as a public company than in a Cisco Systems Inc. buyout, jumped 39 percent after raising $648 million in its initial public offering.

Datadog shares rose as much as 53 percent in trading in New York Thursday. The software company’s first-day closing price gives it a market value of $10.88 billion, more than $3 billion beyond the mark it had set earlier for its IPO.

Before the listing, The New York-based company had received a takeover bid from Cisco that would have valued it at significantly more than what it had expected in its IPO, people familiar with the matter said. Datadog rebuffed the advance to pursue the public listing because it felt it could be worth more as a public company over time, the people said.

Software companies that power business processes have delivered some of this year’s best IPO debuts thanks to their high margins. The value of Zoom Video Communications Inc. and Crowdstrike Holdings Inc. have more than doubled since they began trading and are among the 10 best performing offerings this year, alongside meat alternative maker Beyond Meat Inc. and some biotechnology firms, according to data compiled by Bloomberg.

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Ping Identity Holding Corp., a security software company that raised $188 million in its IPO, also began trading Thursday. Its shares ended the day up 34 percent from its IPO price.

Datadog sold 24 million shares Wednesday for $27 each after marketing them at $24 to $26, according to data compiled by Bloomberg. The range had been increased from $19 to $22 earlier. The shares closed Thursday at $37.55.

‘Intrinsic Value’

”No matter how the deal performs, we believe in the intrinsic value of the company’s product for customers,” said Index Ventures partner Shardul Shah, whose firm was an early backer of Datadog.

Class A shareholders will get one vote per share, while owners of Class B shares will get 10 each, according to the company’s filings.

The company offers a way for corporations to monitor their software online in simple dashboards that pull together multiple pieces of information. This type of service is growing as more companies outsource their computing needs to the cloud.

Datadog lost $13 million during the first six months of 2019, after earning $498,000 during the same time period a year earlier.

It reported a 74 percent gross margin on $153 million in revenue for the first half of 2019. That compared with a 78 percent margin on $85 million in revenue for the same period last year, according to its filings.

The offering was led by Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Credit Suisse Group AG. Datadog is trading on the Nasdaq Global Select Market under the symbol DDOG.

--With assistance from Gillian Tan and Ian King