December 19th, 2007
NetSuite auction doubles IPO price
The NetSuite IPO has gone out tonight at a price of $26 per share, exactly double the lower limit quoted two weeks ago when the company first stated a price range for the offering. According to Reuters, this means the company has raised $160 million in its NYSE debut under the single-character ticker symbol ‘N’. Based on the confirmed price, the market has valued NetSuite at $1.5 billion.
The achievement is a validation of the auction mechanism chosen by NetSuite for its offering. Few companies have chosen to go the auction route since Google pioneered this form of IPO in 2004. But a big risk is that the auction magnifies interest in the offering, leading to an embarrassing price decline after shares start trading. Of course Google, after an initial rocky start, went on to blast through all early predictions of its price potential. Perhaps NetSuite will do the same, although today’s market is somewhat more jittery and with worse fundamentals than 2004’s.
Now that the auction has closed, what matters most is that the company has banked the money, so whatever happens to the stock price, its cash reserves are strong. That positions it well to ride out any temporary setbacks as it seeks to sustain the alluring financials it posted in the weeks running up its pre-Christmas IPO.
Phil Wainewright is a commentator and strategist on emerging software industry trends. See his full profile and disclosure of his industry affiliations.
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