Why GDS Holdings Stock Rocketed 17% Higher Today

After news broke of a potential initial public offering (IPO) of a key business unit, investors piled into GDS Holdings (NASDAQ: GDS) on Tuesday. That rush powered the Chinese data center specialist's stock to an over 17% gain on the day, crushing the marginal gain of the bellwether S&P 500 (SNPINDEX: ^GSPC).

International unit possibly going public

Late Monday night, Bloomberg reported that GDS is mulling the U.S. IPO of DayOne. Previously known as GDS International, the unit consists of the company's operations outside its native China.

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Citing unnamed "people familiar with the matter," the financial news agency said that GDS could list DayOne on an American exchange as soon as this year. It is currently in discussions with banks regarding an IPO; Bloomberg did not identify any of those lenders.

Those talks are ongoing. The article's sources stressed that they might not necessarily result in a deal. If an IPO does occur, it could raise as much as $500 million, Bloomberg reported.

GDS has not yet formally responded to the report.

A potentially crowded field

There might be some urgency to GDS's listing of DayOne. Last December, Bloomberg reported that a rival Chinese data center company, Yovole, is contemplating a U.S. IPO. Meanwhile, the American Depositary Receipts (ADRs) of another such company, VNET Group, trade on the Nasdaq.

DayOne is already well capitalized; that month, GDS raised $1.2 billion to fund the unit. Among other investors, the SoftBank Vision Fund was involved in the financing effort. This left GDS with a stake in DayOne of just under 36%, according to Bloomberg.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.