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The Boston Globe

Business

Web host company raises $252 million in IPO

Massachusetts’ newest public company is a 16-year-old firm that has little public name recognition but clocked in nearly $300 million providing Web-hosting services to medium and small businesses around the country.

Endurance International Group raised $252 million Thursday night selling shares to the public at $12 each. That’s far below the company’s target goal of raising $400 million in the IPO, and indeed, in its first full day of trading Friday the stock turned in a tepid performance.

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But Hari Ravichandran, Endurance chief executive, shrugged off the stock’s first-day performance, saying the more important outcome was a successful navigation of the IPO process, and enough proceeds to improve the company’s balance sheet by paying down debt.

“I literally do not think about it as a day-by-day kind of thing,” Ravichandran said. “For us, it’s a big milestone for our journey.”

Endurance sold 21 million shares at $12, well below the $14 to $16 price that the company had originally proposed. The stock closed Friday at $11.25 on the Nasdaq stock exchange.

Still, it was the fifth-largest initial public offering for a technology company this year. Moreover, the company raised far more than many of the biotech companies from Massachusetts that also went public this year to great fanfare.

The deal, which was underwritten by Goldman Sachs Group Inc., Credit Suisse Group AG, and Morgan Stanley & Co., will probably be dwarfed next month by the initial offering of the popular Internet social network Twitter, which is expected to raise as much as $1.3 billion.

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Endurance provides Internet hosting services to 3.4 million subscribers, most of them small- to medium-sized businesses. Its services are sold under a variety of brand names, including HostGator, FatCow, Domain.com, iPage, and BlueHost.

The company has 2,500 employees, but only about 150 based in Burlington; about 550 are in Provo, Utah, and another 500 in Tempe, Ariz., with most of the remainder in Texas. Endurance also has offices in Brazil and India.

Ravichandran said that after 16 years Endurance is large enough to compete as a publicly traded company. “I think we wanted to get a business that really had scale,” he said. “We feel like we’re there now.”

Web hosting is an intensely competitive market. The research firm IBISworld Inc. estimates there are 18,000 hosting providers in the United States, including major brands Rackspace US Inc., GoDaddy.com, and Web.com Group Inc.

Endurance has grown revenues from $87.8 million in 2010 to $292.2 million last year. However, Endurance has yet to earn a full-year profit, and posted a $139.3 million loss last year.

Kathleen Smith, principal at IPO fund manager Renaissance Capital, said the lower-than-expected initial price of Endurance shares reflected “pricing discipline in the IPO market. IPO investors are not just buying regardless of price,” she said.

Smith added that it’s been a good year for IPOs in general, with an average rate of return of 47 percent on the shares of digital technology companies that have gone public. Seven biotechnology companies from Massachusetts also went public this year, with nearly all of them trading sharply higher on their first day.

Hiawatha Bray can be reached at bray@globe.com.

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