Corporate Finance Strategies for Surplus IPv4 Address Monetization
Normally, a business generates, acquires, and manages various assets—including both the tangible (physical) and intangible (non-physical). While the innate value of tangible assets like cash or property is easy to see and understand, the same can’t always be said for intangible assets.
Take IPv4 address blocks for example. This intangible asset class may be worth a great deal, especially given recent market demand. However, many corporate finance teams are entirely unaware of the potential goldmine that may exist in their IT department. Certainly, they will know little about how to extract its full value. Balance sheets commonly miss any specific mention of IPv4 addresses, whether they are forgotten outright or sorted into a vague category that is easily overlooked when it comes to a merger, acquisition, or divestiture.
IPv4 addresses are the building blocks of connectivity within the digital landscape. Every device on a network—be it a smartphone, a server, or a router—requires an IPv4 address to access and be reached on the internet.
As such, IPv4 blocks have long been considered a prized asset for any business aiming to expand its network. But the price of these internet addresses has skyrocketed in recent years due to their utility and scarcity, especially as major companies like scramble to acquire millions of them.
In 2015, the average price of an address ranged between $7.50–$10. Now, less than a decade later, they range between $40–$60.
But what factors impact pricing?
- Heightened demand – With the emerging ubiquity of IoT devices and the global uptick in smartphone usage, the demand for IPv4 addresses has increased substantially even as supply reached exhaustion. Greater levels of demand coupled with dwindling supply, leads to higher prices.
- Slow migration to IPv6 – Despite IPv6 being the next step in internet evolution, its adoption has been slower than originally predicted.
- Regional scarcity – Depending on the Regional Internet Registry (RIR), regional scarcity can influence IPv4 prices. Each region has its own supply of IPv4 addresses and policies governing transfer protocols. Some exercise more stringent regulations or different time frames regarding transfers which result in different markets for IPv4 addresses.
- IPv4 Reputation – Every IPv4 address carries an online reputation based on its usage history, geographical location, and any blacklisting due to suspicious activities associated with its use —all of which can impact an address block’s market value.
- Role of an IPv4 Broker – In this complex market, an experienced IPv4 broker can offer valuable services such as market analysis, pricing negotiation, and transaction management, resulting in more favorable terms for the seller.
Another factor in IPv4 valuation and management is the block size.
In the past two years, the larger the block of adddresses, the more each IP address included in it was worth. However, i n recent years, there have been fluctuations in the value of different-sized IPv4 blocks.
For example, in 2020, a significant price gap emerged between larger and smaller blocks. According to a report by IPv4.GLOBAL: “From June 2020 through August 2021, the price gap between large and small blocks ranged from 2.4% to 17.5%. This dynamic led to sellers breaking up /16 blocks to be sold in multiple transactions of smaller blocks since this netted more per address for the seller.”
Since late 2021 a curious price inversion has occurred in IPv4 markets. The long-term trend that discounted large blocks has reversed. Blocks of 65,000 addresses and more now trade for 20-35% more than small blocks.
If a business is currently sitting on a large inventory of IPv4 addresses, it is in good company. Many business owners are surprised when they uncover a vast surplus of unused IPv4 addresses—more than they could ever hope to utilize to their fullest extent.
Rather than simply letting those intangible assets lie dormant, many companies opt to monetize their address stockpile to fund both immediate and big-picture endeavors.
Typically, most businesses will select one of two monetization pathways:
- Sell the unused IPv4 addresses – Corporations may choose to sell IPv4 blocks outright, transferring ownership to the purchaser.
- Lease the IPv4 address – Alternatively, corporations can lease out unused IPv4 blocks. This allows them to retain ownership while generating a regular passive income stream.
Which option is best for a business?
|Sell Addresses||Lease Addresses|
|Control Over IPv4 Addresses||Transfer ownership||Retain ownership|
|Time Commitment||Low (once sold)||High (continuous)|
|Time Commitment||Low (once sold, management ends)||High (continuous management of lease agreements)|
|Market Dependency||High (dependent on current market rates for sale)||Medium (depends on ongoing demand for|
IPv4 Address Discovery in M&A
IPv4 addresses can be thought of as a piece of art or memorabilia that’s been sitting in the attic, gathering dust for years. Overlooked and forgotten, they remain buried in the company’s ledger, lumped in with the “miscellaneous” section of the company’s intangible assets. That is, until an asset audit—usually during the lead-up or aftermath of an M&A deal—brings them to light.
Suddenly, that “piece of junk” is actually worth a fortune. In some cases, IPv4 address blocks are passed on and rolled over from multiple merger and acquisition deals, having been looped in as miscellaneous assets over and over again. As previously mentioned, many balance sheets exclude any specific mention of these IPv4 addresses prior to a sale, so it is crucial to take inventory and potentially uncover these surplus IPv4 blocks that can be liquidated for significant financial gain.
Corporations that own IPv4 address blocks can utilize them to drive business expansion. Benefits of these intangible assets include:
- Monetization opportunities – Businesses with excess IPv4 addresses can monetize them through sales, leases, or use them as collateral for loans, generating revenue or securing funds to finance business ventures.
- Support for expansion – As a business grows, it may need to add additional IP addresses. A stockpile would allow a business to fund expansion without investing in more addresses.
- Leverage in M&A – In mergers and acquisitions, the visible presence of IPv4 addresses on the balance sheet represents a valuable asset that can add to the overall worth of the company.
- Flexible financing – IPv4 addresses can serve as an asset that powers flexible financing strategies, such as collateral for a loan.
In the modern financial landscape, IPv4 addresses represent valuable intangible assets that can help drive business growth and financial stability. Yet, harnessing their full potential requires strategic insights and expert management.
As an ARIN-qualified facilitator, IPv4.Global can help your business navigate the complex marketplace while maximizing the ROI of its intangible assets. With more than 60+ million addresses brokered, we’re the world’s leading broker for appraising, selling, or leasing IPv4 blocks.
For transparent, experienced, and reliable brokerage services, contact us today.