DataDog’s Stock Surges As It IPOs After Rejecting Cisco’s Buyout Offer

DataDog’s stock popped on Thursday morning following reports that Cisco attempted to scoop up the cloud monitoring software firm for more than $7 billion before it went public.

DataDog, a cloud monitoring-as-a-service firm, saw its stock rise 50 percent above its initial IPO price upon making its debut on the stock market on Thursday, proving that subscription-based software is all the rage among IT buyers.

DataDog's stock surged to $40.50 out of the gate, up from the original IPO price of $27, valuing the firm at $11.7 billion.

Cisco Systems, a competitor of DataDog, reportedly offered to buy New York City-based DataDog for a "significantly higher" sum than the $7 billion valuation the company targeted as DataDog filed to go public in August, according to Bloomberg citing sources familiar with the matter.

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A spokesperson for Cisco declined to comment on rumors or speculation regarding the report. DataDog did not respond to questions regarding Cisco's buyout attempt prior to publication.

Ahead of its U.S. IPO on Wednesday, DataDog raised $648 million, selling 24 million shares for $27 each after marketing them at $24 to $26. The listing Thursday morning valued Datadog at $7.83 billion.

DataDog offers a subscription-based service that developers and IT administrators can use to monitor applications and underlying infrastructure. Its software can track performance for systems running in public clouds, or in corporate data centers.

The nine-year old company competes with the likes of cloud providers such as Amazon Web Services and Microsoft Azure, in addition to players like Cisco, Elastic and Splunk.

DataDog reported 2018 revenue of $198 million as well as a net loss of $10 million for that year, according to its S-1 filing with the U.S. Securities and Exchange Commission. The firm said it had 1,212 employees operating across 24 countries as of June 30, 2019.

The successful IPO demonstrates that the market is favoring software companies focused on subscription-based services. Even the incumbent IT leaders are turning their attention to subscriptions and services, as opposed to hardware sales.

Cisco, for its part, has had success scooping up companies right before their IPO, including AppDynamics, which the San Jose, Calif.-based tech giant scooped up for $3.7 billion in 2017.