IPO Watch: NetSuite

Ann C. Logue | Dec 18, 2007 6:20am EST | Comment

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NetSuite
www.netsuite.com
(NYSE: N)
Scheduled for the week of Dec. 17
$114.1 million estimated proceeds
$952.2 million post-money valuation

It’s unclear exactly when this deal will be priced, but no matter: it’s worth talking about. NetSuite offers a range of business management software applications that small and medium-sized businesses can use as they need, an arrangement known as software as a service, software leasing, or application service provider software. Customers can get customer relationship management, eCommerce, data management and other software as they need it, and they can scale up or down as their business needs change. NetSuite has more than 5,300 customers who helped the company generate $67.2 million in revenue in 2006. The company lost $23.4 million last year, though.

This deal’s big draw is NetSuite’s lead investor, Larry Ellison, who is the founder and CEO of Oracle Corporation (Nasdaq: ORCL) (Disclosure: I write for some of Oracle’s in-house publications as well as for this newsletter.) He owned 60.9% of the company before the IPO, and he is expected to have more than half of it afterward — not including the shares held by his children. Part of the appeal for Ellison seems to be reaching a customer base that is too small for Oracle’s products. He’s not selling any stock on the IPO, but he will be transferring his ownership to a separate limited liability corporation in order to eliminate his voting control and any conflicts of interest that could develop between Oracle and NetSuite.

Credit Suisse and W.R. Hambrecht are the underwriters and Hambrecht’s involvement means that this offering will be done through an auction process. In a traditional offering, the investment bankers solicit their customers for orders and then try to match them with the shares being offered. This usually works well, but on occasion, it causes the banks to allocate shares to favored clients or to keep the offering price below what is best for the company. In the auction, which will run on www.wrhambrecht.com, investors specify how many shares they want to buy and at what maximum price. The price at which all of the shares will be sold is the price where the deal closes.

Recent IPOs:

3Par (www.3par.com; NYSE: PAR; Nov. 15; $892.5 million post-money valuation): 3Par works in a boring but growing sector of IT: utility storage. Government agencies, financial services companies and even social networking companies like MySpace have tons of data that has to be stored somewhere, but also has to be accessible whenever someone needs to search for it. 3Par’s servers and software solve the problem. This deal raised money for general corporate purpose, helping to offset a string of losses. There was strong demand for the shares; 3Par came public at $14 per share, above the filing range of $11 to $13 and up from the IPO price.

Cardtronics (www.cardtronics.com; Nasdaq: CATN; Dec. 10; $381.9 million post-money valuation): I hate ATM machines. They are an excuse for the bank to start charging outrageous fees, so I get money the old-fashioned way: I walk to my neighborhood branch and cash a check. But most people would rather pay the fees, making the ATM business a big one. Cardtronics operates a network of ATMs in the United States and Mexico, many of which are found at 7-Eleven, ExxonMobile, Target Corporation (NYSE: TGT), and CVS Caremark Corporation (NYSE: CVS). Some are branded by a bank and others are Cardtronics’ own. The company makes $0.54 on each withdrawal, but it still manages to lose money. The deal was priced at $10, below the $14 to $16 filing range.

Chimera Investment (www.chimerareit.com; NYSE: CIM; Nov. 15; $554.3 million post-money valuation): Chimera is a real estate investment trust investing in residential mortgages, not exactly the hottest sector of the financial markets these days. Of course, the way to make money is to buy low and sell high. This REIT is managed by Fixed Income Discount Advisory Company (FIDAC), an experienced mortgage investor, and it intends to invest in prime residential mortgages, as well as Alt-A mortgages (those with less than perfect documentation) and non-agency mortgage-backed securities. The offering was priced at $15 per share and has been trading near to that.

VisionChina Media (Nasdaq: VISN; Dec. 5; $572.5 million post-money valuation): VisionChina operates a mass-transit advertising network in 14 Chinese cities. In some cities, commuters can watch news and advertising while they ride; in others, they can see the ads in bus shelters and stations. The company has content agreements with CDMTV, and it carries ads for national and international corporations. VisionMedia’s SEC filings claim that its Web site is www.visionchina.cn, but that address doesn’t seem to work. The deal was priced at $8, below the $9.50 to $11.50 filing range.