VC-backed GDS prices IPO below indicative range

The company sold 19.25 million American Depository Shares (ADS) at $10 apiece, according to a filing, having originally targeted a price of $12-14 per share. Underwriters have the option to purchase a further 2.88 million shares under the overallotment option.

No existing investor sold any shares in the offering. SBCVC holds a 15.8% interest in the business, having been diluted from 18.1%, although its voting power is 5.3% due to the dual class share structure. The VC firm participated alongside the International Finance Corporation (IFC) in a $23 million Series A round for GDS in 2007 and a $9 million Series B in 2011. IFC transferred its holding to SBCVC in 2014.

Ping An Insurance owns 8.3% of the company (3% in terms of voting power), down from 9.9%, while Singapore Technologies Telemedia (STT) - a global data centers player that invested $247 million in GDS in 2014 - has been diluted from 45.1% to 41.3% (14.3% voting power).

A further 7.6% of the company is owned by shareholders of EDC, a China data center infrastructure services provider acquired by GDS in 2014. They own class B shares alongside the GDS management team, and therefore hold 42.2% of the aggregate voting power.

GDS was established in 2006 and had eight self-developed data centers covering 39,781 square meters as of June. It also operates 10 smaller data centers owned by third parties. According to 451 Research, the company is the largest service provider in China's high-performance carrier-neutral data center services market, with 19.7% market share in 2015. It serves more than 300 customers, including internet companies, financial institutions and telecommunications and IT services providers.

Driven by regulatory change and rising demand - a function of increasing internet penetration, growth in cloud computing, compliance requirements on data security, and a greater willingness to outsource - China's data center area has more than doubled from 591,482 sqm in 2010 to 1.2 million sqm last year. It is expected to reach 1.7 million sqm by 2018. Market revenue, which totaled $1.2 billion in 2010, came to $3.1 billion in 2015 and is projected to hit $4.2 billion by 2018.

Carrier-neutral data center providers such as GDS are tipped to prosper, achieving a 33% market share by 2018, up from 29% last year.

Investor interest in this trend was confirmed earlier this week when Warburg Pincus agreed to partner Chinese internet services provider 21Vianet - a leading domestic carrier-neutral service provider - on a joint venture that will develop and acquire data centers. 21Vianet will seed the platform with four of its existing data center assets valued at more than $300 million in all, while Warburg Pincus will contribute capital along with its resources and experience in the real estate sector.

GDS posted RMB703.6 million ($105.9 million) in revenue for 2015, up from RMB468.3 million the previous year. EBITDA rose from RMB38 million to RMB164.7 million over the same period, while net losses narrowed from RMB130 million to RMB98.6 million.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Technology
• IPO
• Infrastructure
• China
• Softbank China Venture Capital
• Exit