NetSuite Plans Google-Style Auction IPO

NetSuite expects its IPO to total 6.2 million shares and bring in at least $80.9 million.

NetSuite's IPO dreams are coming to fruition—with a twist. NetSuite plans to begin trading on the New York Stock Exchange Dec. 21 under the symbol 'N.' But NetSuite, majority-owned by Oracle CEO Larry Ellison, is taking a decidedly Google approach to selling its shares. When Google went public in 2004 with the hottest offering in years, the stock opened at $100.01. Google executives insisted on a highly unusual format of granting shares: an online auction. The theory was that an auction would make its shares more widely available, particularly to individual investors.
NetSuite, a true Internet company, is following in Google's footsteps. It plans to conduct an auction, open to prospective purchasers, to determine the IPO (initial public offering) price and the allocation of shares in the offering, company officials said. The company started talks with potential investors and set the terms of its offer Dec. 6. Click here to read about why NetSuite majority shareholder Larry Ellison put his voting rights under lock and key. Either way—through an online auction or the more traditional "book building" process—Ellison and his family stand to make a pretty good buck on the deal. Collectively Ellison's family owns 74 percent of NetSuite, a percentage that will drop down to about 66 percent after the IPO. NetSuite expects the IPO to total 6.2 million shares of common stock to be priced between $13 and $16 each. The company also expects to raise about $80.9 million in the initial offering. NetSuite officials said in a statement that the company will use the proceeds from the offering to repay the $8 million balance on a secured line of credit with the company's controlling shareholder Tako Ventures, a company controlled by Ellison. NetSuite, which develops on-demand ERP (enterprise resource planning) software, also plans to use the extra cash from the IPO to make some acquisitions. Though NetSuite's revenue has been on the rise the last couple of years, the company has yet to claim a profit. In the first three quarters of 2007, NetSuite's revenue rose 63 percent to $76.8 million, compared to the same year-ago period. Losses so far this year have been $20.6 million, down from $26.9 million in the same period last year. NetSuite has about 5,400 customers. Check out eWEEK.com's Enterprise Applications Center for the latest news, reviews and analysis about productivity and business solutions.