Zayo Group IPO raises $400 million, stock price rises on first day

Zayo Group Holdings Inc. downsized its initial public offering but also saw its share price surge on its first day of trading Friday.

The Boulder-based broadband infrastructure provider’s IPO brought in $400 million for the company and selling stockholders.

Shares priced at $19 each, less than the range of $21 to $24 that the company projected in recent regulatory filings. The IPO also included only about 21.1 million shares, nearly 8 million fewer than the company had expected.

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Trading on the New York Stock Exchange under the ticker symbol ZAYO, Zayo’s shares began trading at $21.51 Friday morning when markets opened and rose as high as $22.85 before tapering off and closing at $22.00.

Zayo treasurer Scott Reardon said company officials knew they were entering a choppy market when they launched the IPO, which led to the lower-than-expected offering price.

“In the end, we’re very happy to have been able to price in probably about as difficult market environment as we’ve seen in some time,” Reardon said.

Reardon said the lower offering price in turn led to the decreased number of shares being offered as early investors in the company wait and see if they can perhaps get a higher price down the road in a follow-on offering.

The company stated in a regulatory filing that it had sold a little more than 16 million shares, while more than 5 million were sold by selling stockholders. Underwriters have the option of purchasing another 3 million shares from selling stockholders. The company had originally expected selling stockholders to unload about 17.8 million shares.

“Our investor group is very bullish and very confident in our ability to continue to grow,” Reardon said.

The company does not receive proceeds from the sale of shares by selling stockholders, but noted that after the underwriting discount and estimated offering expenses that it expects to reap net proceeds of $281.8 million.

That’s actually more than the company had projected. Zayo Group Holdings initially planned to sell only 11.1 million shares, which even at the high point of the projected offering range would have brought in only about $266 million in proceeds for the company.

The company proceeds, Reardon said, could be used to pay down certain company debt at more favorable terms, or could be used for general corporate functions such as further acquisitions or organic growth.

“We’ve been generating cash pretty consistently, but there continue to be a number of consolidation opportunities in front of us,” Reardon said.

Zayo, founded in 2007, has grown rapidly mostly through the acquisition of more than 30 companies. The company provides metro, regional and long-haul fiber optic networks, as well as data center services.

Zayo posted revenue for the fiscal year ending June 30 of $1.1 billion and a loss of about $180 million.

The company employs about 1,400 people, including about 150 in Boulder and more than 400 in Colorado overall.