With the IPO of Website Infrastructure and Security company Cloudflare (NET), it is important for investors to understand what it really entails before doing anything else. For those who may not know Cloudflare offers a number of cloud-based services which were initially performed by on premise solutions including Virtual Private Networks (VPNs), routing, traffic optimization,firewalls to mention a few. As is the case with most recent software-as-a-service (SaaS) IPO’s, Cloudflare tends to operate on a “freemium” model. They are thus forced to deal with the challenge of getting paying customers to pay more, getting free customers to pay and moving users up the value chain.
The relationship that exists between Cloudflare and tech giants could end up playing a key role in determining its future. Among the most notable tech giants to collaborate with Cloudflareinclude IBM cloud, Microsoft Azure and Google Cloud. However, Cloudflare S-1 partnership with tech giants may only be temporary. This is because most tech giants may want to rely on a third party for key elements of their cloud platform in the long run. Fortunately, some companies could end up becoming potential acquires.
Even though an acquisition could come as good news to investors, thepoor corporate governance of Cloudflare might end up derailing things. With the company planning to go public using a dual-share structure, insiders and early investors will have 10 times the voting rights of the shares sold to the public. Therefore, directors and executives will have control over 66% of the voting power. This means public shareholders are not going to have any say in corporate governance. In addition, the executives can also block any potential acquisition that would be in the best interest of shareholders in order to stay in control.
Stella Tennant has helped several global brands, which get heard across the digital space, through result driven content & social media marketing efforts. Studying blockchains and cryptocurrencies makes her hopeful of a free and decentralized future.