NetSuite sets initial stock price at $26
NetSuite on Wednesday
set the initial price of its stock at $26, greatly exceeding its original estimate.
The company is selling 6.2 million shares of stock. It said in a filing
with the U.S. Securities and Exchange Commission that the proceeds from the
sale would net it $151.9 million after expenses.
NetSuite, which sells a line of hosted business software, company initially
set the suggested price range for its stock at $13 to $16, and subsequently
raised it to $16 to $19 and then $19 to $22. The stock is now trading on New
York Stock Exchange under the symbol "N." After rising to $39.01,
shares had dropped to $25.76 at 10 a.m. Eastern Time.
The company set the price by running an online "Dutch" auction, in
the same fashion of search giant Google, instead of having underwriters set
the price.
Scott Sweet, managing director of IPOboutique.com,
a firm that tracks the IPO market and offers investment advice, said NetSuite
is greatly overvalued as a result of the auction.
"Once again the Dutch auction concept failed to live up to its self-described
mantra as being a better conduit in the pricing of an IPO by the investors than
the standard method of pricing by the underwriters," he said in an e-mail
message Thursday. "In past Dutch auction deals, and it appears the same
in this case, investors put in overzealous high bids to 'beat' others in a scramble
to get shares. In doing so, it is highly likely that it has greatly diminished
the IPO's performance and highly overvalued the company."
NetSuite has said it plans to use proceeds from its IPO to pay off an $8 million
balance on a line of credit with Tako Ventures, an entity controlled by Oracle
CEO Larry Ellison, and to possibly make acquisitions.
Ellison controls about 60 percent of NetSuite's outstanding stock -- some 31.9
million shares.
NetSuite said Wednesday that Ellison has now completed the transfer of those
shares into a holding company, NetSuite Restricted Holdings. The move is meant
to "effectively eliminate" Ellison's voting power and avoid potential
conflicts of interests, NetSuite said.
IDG News Service
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