Cogent Announces $206 Million IPv4 Address Securitization Offering

Cogent Communications Offers Secured Notes Of $206 Million with IPv4 Addresses as Collateral

Companies looking to improve their business through increased capital often use secured notes to attract lenders and investors. By offering notes backed by something of value, lenders will have increased faith in the ability to pay which in turn lowers interest rate, extends payment time and even improves the reputation of the company should the debt is actually paid. The type of asset offered as collateral also comes into factor on the loan they could get from potential lenders.

Cogent Communications, a US-based tech company that specializes in providing internet services worldwide recently announced through their press release that they are offering secured notes worth $206 million in total. While offering secured notes is a normal move for any company, what makes this announcement special is the fact that their secured notes “will be secured by certain of Cogent’s IPv4 addresses, customer IPv4 address leases and customer accounts receivables.”

That’s a massive amount of money to be backed by something different. A collateral in these secured notes often come with something more “visible” such as real estate, equipment, other physical assets owned by the company or even vehicles. But Cogent Communications has seen the value of their IPv4 addresses and is taking full advantage of it by raising funds through secured notes. These notes are expected to be repaid in five years.

Seeing the Value in IPv4

While offering IPv4 assets as collateral for secured notes is unique, a closer look at the offering actually shows a brilliant move by the company and an opportunity for lenders to dip into something valuable: public IPv4 addresses.

There are only roughly 4.3 billion public IP addresses available due to the limitation of the 32-bit address space and all of them, unfortunately, are already snatched up due to the meteoric demand and importance of the internet. These properties can still be used but they are often offered as a lease from their owner - after the website is done with the IP address, the property reverts back to the owner.

It’s a brilliant strategy that allows Cogent Communications to earn through IP address leasing.

You want how much potential value an IPv4 address is? In 2020, TechRadar reported that Amazon has spent a total of $2.5 billion to purchase “in excess of 100 million unique IPv4 addresses.” Spending that insane amount of IPv4 addresses may sound like finding a solution to a problem that doesn’t exist but it did pay off big time a few years later. In 2023, Amazon through their Amazon Web Services announced that they will start charging $0.005 per hour per IP address. Experts estimate that this IP address leasing will cost websites up to $43 per year.

According to the TechRadar report, Amazon paid roughly $25.00 per IPv4 address ONCE. In less than five years they will be earning nearly twice that amount ANNUALLY.

The Future of IPv6

IPv6 is the future of the internet - a more secured, robust and faster version of IP addresses. However, the challenge of adapting IPv6 is extremely slow. Companies know the value of using IPv6 not only on security and stability but the cost of migrating to IPv6 is considered too high. According to TechTarget, “Unless businesses require improved network hardware performance efficiency, complex quality of service (QoS) policies or tighter security within the network, it might be a challenge to justify the cost to transition to IPv6.”

For now, IPv4 is doing its job in keeping internet users around the world together - making them a valuable asset for any tech company. Cogent Communications should be able to find backing for their secured notes offering since the use of IPv4 addresses will still be there in the near future.