Switch's Las Vegas data center. Photo courtesy Switch

Switch, the Las Vegas-based data center giant that’s undergone a meteoric expansion over the last five years, will file its initial public offering (IPO) Friday at a price slightly higher than the range projected in September, en route to likely becoming one of the biggest tech IPOs of the year.

The company plans to begin selling shares at $17, with more than 31.3 million shares being sold. That means it will raise roughly $532 million from becoming a publicly traded business.

The share price is a sign of strong demand from investors for Switch, which was founded in 2000 and has continued to grow steadily under founder and CEO Rob Roy. Kathleen Smith, a principal and co-founder of Connecticut-based IPO research firm Renaissance Capital, said that investors are looking to reward companies that show impressive profit margins and have laudable attributes.

“I think that the IPO market is willing to give a premium valuation to companies that know how to earn money and that are growing,” she said. “And this company is doing both.”

In a filing with the Securities and Exchange Commission issued in September, the company said it had raised revenues from $166.8 million in 2013 to $318.4 million in 2016, and brought in $35.3 million in net income in the first six months of 2017. The initial price per share was estimated to be between $14 and $16 back in September, with shares traded on the New York Stock Exchange under the symbol SWCH.

Switch’s primary data center (and main revenue driver) is located in Las Vegas, but the company has opened similarly large facilities (called “Primes”) at an industrial park north of Reno, in Grand Rapids, MI and is planning another site in Atlanta, GA. It’s also launched two international data centers in Italy and Thailand in a partnership with two large investment firms.

“Our Primes are strategically located in geographies that combine a low risk of natural disaster, favorable tax policies for customers deploying computing infrastructure and low latency connectivity to major metropolitan markets, such as Los Angeles, San Francisco, Silicon Valley, Chicago, New York, Northern Virginia and Miami,” the company wrote in a filing with the SEC.

Switch serves more than 800 customers, including several household names such as eBay, Verizon Communications, and JPMorgan Chase. Smith said that the combination of large customers coupled with the company’s plans for expansion and the continued personal involvement of the founder made it attractive to investors.

“They’re expecting this company to grow. This is good,” she said. “It’s not your typical Silicon Valley company. No venture founder, built boot-strapped and profitable. That’s a good formula. It’s easy when you’re a number cruncher like we are, it’s a lot easier to value a company when they have earnings.”

A profitable valuation and influx of cash promises to not only be good for Switch, but Las Vegas as well, said Mike PeQueen, a wealth management advisor with Hightower Las Vegas. While it’s unclear whether the company will use funds from the IPO to physically expand in Las Vegas, Switch will likely rely on ancillary companies to provide needed services while also giving the state and city a non-gaming resume booster for other businesses looking to relocate or start up in Nevada.

“Having a corporate headquarters means that the corporate headquarters itself will likely expand and grow here,” he said. “Look at Microsoft and Seattle. Microsoft does this around the globe, and Seattle has benefitted tremendously from their headquarters being there.”

PeQueen noted that Switch’s corporate structure follows a pattern of other tech companies in using special shares to limit the power of minority investors. Roy, the founder and CEO, will retain 68 percent of voting power and maintain control of day-to-day operations because of the use of a special share class that gives him 10 votes per share.

“In my mind, as a shareholder who’s not one of those, I don’t like that,” he said. “But they can get away with it — (Mark) Zuckerberg, Larry Page and Sergey Brin — can get away with it because people believe in them and believe in their companies enough to look past that.

Smith agreed that Switch’s treatment of smaller shareholders was “not ideal,” but said the ongoing personal involvement of the founder and other positive fundamentals made it easier to swallow.

“Clearly Rob Roy has a big part of Rob Roy in this company,” she said. “This is an important business for the founder. So he’s going to be pretty committed, and shareholders will see that.”

Disclosure: Switch is a major ($250,000) financial supporter of The Nevada Independent. Mike PeQueen, a partner at HighTower Las Vegas, holds a seat on the five-member board of The Nevada Independent. HighTower Las Vegas is also a client of E Thompson Media, a communications and public relations consulting firm owned by the managing editor of The Nevada Independent, Elizabeth Thompson.  A complete list of Indy donors and sponsors can be viewed here.