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NetSuite's Red Hot IPO

If you are near New York City and just heard a loud swooshing sound, that was the climbing price of NetSuite’s stock shooting for the sky. If you are near Silicon Valley and just heard a loud swooshing sound, that was Larry Ellison's bank account ratcheting up by another billion dollars or so.

NetSuite began the next phase of its corporate evolution by trading as a public company on the New York Stock Exchange today after raising $161 million in a public offering that earns the accounting software as a service manufacturer a slightly higher than $1.5 billion company valuation. All this from a hosted software company which is $242 million in the hole after nine years in business, $20.6 million down for the first nine months of the year on $76.8 million in revenues, and projects a very questionable profitability forecast. NetSuite currently employs 600 and has yet to make a profit, however, its revenue growth is impressive and its loss has narrowed from $35.7 million last year to $20.6 million in the nine months to September.

NetSuite increased its coming-out price three times in the hours before its Dutch auction IPO. The proposed stock price initially went from $13.00 to $16.00 upward to $16.00 to $19.00. Later on Wednesday it continued to climb to $19.00 to $22.00 and finally settled later on Wednesday night at $26.00 (shortly after Oracle posted its market beating financial results). The Dutch action method, made famous by Google in 2004, is supposed to value the shares closer to their actual market value than a typical IPO, which often prices shares at a discount. Of course there are the pundits and skeptics who claim the stock and the company is overvalued. These people have been making this claim lately about VMware and for years with I think these are the same people who chose not to participate in the IPO.

To celebrate the day’s special occasion, NetSuite CEO Zach Nelson rang the opening bell and was joined by NetSuite Founder, Chief Technology Officer and Chairman of the Board, Evan Goldberg, and NetSuite CFO Jim McGeever. Both Nelson and Goldberg came to NetSuite from Oracle where Nelson was a marketing guy and Goldberg was a programmer.

Now the challenge is to show increased growth under the public microscope. NetSuite has long been rumored to have excessive customer churn, operational difficulties and lack of assured hosted software delivery (due to a lack of data center availability). We’ll see if having tons of available money remedies these alleged misgivings or if the scrutiny of public market oversight clarifies these events in the public venue.

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blog postPost: December 20, 2007 in NetSuite | Permalink | Comments (2) | TrackBack (0)
tagTags: NetSuite, Oracle, IPO
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Trackback URL for this blog post: http://www.haileyblog/netsuiteipo.htm
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Did you participate in the NetSuite Dutch auction?

Posted by Colleen Halloway on December 24, 2007


I'm sorry to say that I didn't. I'm not really much of a stock analyst or trader. I typically value software technology companies by my own exposure with their products, which is often not a primary factor by the public or which ultimately values the stock price.

Posted by Hailey on December 24, 2007





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