Shares of Limelight Networks, a Tempe-based company that helps deliver videos, games, music and other digital content over the Internet, surged in price Friday following an initial public offering.
Initially offered at $15 a share, the stock traded up to $24.33 early in the day before closing at $22.18 on the Nasdaq stock market.
The IPO raised about $174.4 million for the company, which far exceeded its earlier expectations of $114.2 million to $135.4 million, according to regulatory filings with the Securities and Exchange Commission.
The company originally expected the initial offering price to be in the $10 to $12 range. The company offered 16 million shares in the IPO, up from the originally anticipated 14.4 million.
Analysts said the demand for Limelight stock was strong because of the key network services that it provides to companies like Microsoft and Viacom, allowing them to deliver digital content through their Web sites. To handle the cumbersome needs of distributing content, most Web sites have turned to content delivery networks like Limelight’s to store content closer to end-users, thereby reducing delivery times and improving the user experience.
Limelight has developed a network of more than 4,000 high-performance servers clustered in 54 locations to deliver media files through the Internet.
The company has about 800 customers, with video/music sites such as MSNBC, ABC, Viacom and XM Radio accounting for 45 percent of sales and social media such as MySpace and Facebook accounting for 32 percent, according to Renaissance Capital, a research and investment management firm.
Founded in 2001, Limelight has become the No. 2 player in the market behind Akamai Technologies, which is about six times larger in terms of revenue. The market is continuing to grow rapidly with Internet traffic surging more than 75 percent a year since 2003, Renaissance said.
Limelight’s revenue more than tripled in 2006 to $64 million and grew 111 percent in the first quarter of 2007. But the company suffered a net loss of $4.4 million in the first quarter because of heavy costs for marketing and network expansion. However, rapid growth should produce strong cash flow by 2009, the research firm said.
Renaissance believes the biggest threat to Limelight’s future business is a pending patent-infringement case brought by Akamai and MIT last June. The case is expected to go to trial in 2008 and will cost the firm about $8 million in legal expenses.
“With no resolution to the trial in the immediate future, we believe investors will be attracted to the firm’s strong fundamentals and discounted valuation relative to Akamai,” Renaissance said in a summary of the Tempe company on its Web site, ipohome.com.
The Tempe company offered 12.5 million shares in the IPO and executives, investment bankers and other stockholders sold the other 3.5 million. Limelight said it will not receive proceeds from the sales of shares by the stockholders, which amounted to $48.8 million. Before the IPO, 16 directors and executives as a group owned 66 percent of the company. Investment firms owned the remainder. Regulatory filings show the company expects to use the net proceeds for working capital and general corporate expenses and to partially fund investments in network and other equipment, estimated to amount to $80 million in 2007 and 2008. Also, Limelight plans to use about $23.8 million to repay debt. The company’s shares are listed under the symbol LLNW.
The Associated Press contributed to this report.