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Developer-based cloud infrastructure corporation DigitalOcean Inc. made its debut in the public market on Wednesday, 24th March. Naturally, the expectations were high as always for it to the top and be a success, but things went downhill from the get-go, when the company shares went down, losing 10% value just on the first trading day.
DigitalOcean made its Wall Street debut in the NY Stock Exchange using the symbol of DOCN. With a $47 set IPO price on the bright Wednesday morning, the stock, unfortunately, only opened at $41.50, which was around 10% lower than its IPO price. The day ended at $42.50.
DigitalOcean trades “developer cloud,” and their goal is to makes it simpler for developers to create modern applications. The DigitalOcean app assists developers in deploying their app code during production with few clicks. This happens in line with DigitalOcean’s declared objective of streamlining cloud computing. Their concept is that when deployment is all set, developers can easily devote more time to writing codes and focus on that. This could help in significantly easing their overall work.
However, their IPO stock plummet came as a mild surprise because it is almost a rarity for newly public tech stocks nowadays. There is always a certain enthusiasm by the public market as fresh tech firms, particularly cloud companies, get extra attention as there’s always a need for newer concepts. This is why many of them see an instant surgeon their first day. DigitalOcean’s situation is a reflection of the market dynamics, or it may indicate some underlying company issues.
Before the IPO in 2020, the company did report their S-1 filing revenue to be $318.4 million, which was higher by about 25% from the previous year. Simultaneously, their losses were steady, surging narrowly from $40.4 million to $43.6 million in 2019 and 2020, respectively. In their prospectus, they state they intend to accomplish profitability by getting more revenue from every customer. It was also mentioned that they will also reduce their general, research, developmental, plus administrative expenses as a percentage of their earnings.
The corporation plans to bring in analytics software in the game to amp things up. This would help customers better use their data as the data will be stored in their special data center. DigitalOcean plans to take on the big names like Google LLC and Microsoft Corp that currently dominate the infrastructure domain. Their focus is to keep their service simple and gain some edge over the rivals.
Presently, DigitalOcean is governing 14 data centers in America and other countries via leases; they plan to spread out by expanding their footprint. However, they suffer from a major disadvantage: Unlike their major foes, they do not have a strong footing in revenues or funds agreed by customers for future services. As of last year, DigitalOcean amassed almost $5million deferred income only. The majority of their income originates from the sale of “droplets.” These are the virtual pieces of bodily servers. The backers encompass high-profile investment capital firms like IA Ventures and Andreessen Horowitz.
Analysts state that it could be interesting to see how DigitalOcean will fare and find some equilibrium. The company is wading through the cloud marketplace, which already brims with highly experienced players. However, this situation does set them back, but they must tread carefully in the future.
Nonetheless, some analysts still applaud their approach and say that DigitalOcean possibly timed their IPO very well by dabbling into the capital market. This remains a rather favorable time for cloud startups. It all depends on how well they expand and explore new avenues to get back on their feet.