Cloudflare Inc. today updated the prospectus for its upcoming initial public offering, revealing that it’s looking to sell 35 million shares at $10 to $12 apiece.

That works out to a fundraising target of between $350 million and $420 million. The final figure will likely be higher, since the banks underwriting the offering have reserved the option to buy up to 5.25 million additional Cloudflare shares at the IPO price. If the underwriters fully exercise their purchase rights, the content delivery provider could raise as much as $483 million.

The $10 to $12 share price target suggests a certain degree of caution on Cloudflare’s part. Under this range, the company would receive a post-IPO market capitalization of $3.5 billion on the high end and about $2.9 billion on the low end, less than the $3.25 billion private valuation it received after its most recent funding round. 

The hesitance to go too far beyond Cloudflare’s private valuation might be a reaction to this year’s mixed bag of tech IPOs. Some of the companies that went public in 2019, such as Crowdstrike Holdings Inc., have made respectable gains on the stock market. But others, notably Uber Technologies Inc. and  Lyft Inc., are trading well below their initial listing price. 

Cloudflare has a number of factors working to its advantage that could help it win a positive reception on Wall Street. Chief among them is a rapidly growing top line. The company increased revenue by 48% in the first six months of 2019, to $129.2 million, and previously achieved a 51% compound annual growth rate from 2016 to 2018.

Cloudflare has not yet turned a profit, but it’s getting closer to climbing out of the red. Against the backdrop of its 48% sales gain in the first half of 2019, net losses grew by a comparably tame 13%, to $36.8 million. The fact that Cloudflare is spending a declining percentage of total revenue to maintain its momentum will no doubt be noted by potential IPO investors.

The company is following in the footsteps of Fastly Inc., a rival provider of content delivery services that went public in March. Fastly is similarly unprofitable with a fast-growing top line. The company’s stock briefly dipped below its IPO price after an earnings miss last month but has otherwise fared well and is up more than 80% since the listing.

Cloudflare reportedly plans to go public this month. According to the IPO filing, the company is set to debut on the New York Stock Exchange under the ticker symbol “NET.”

Photo: Cloudflare