NetSuite floatation to raise £50 million

NetSuite, the business software as a service (SaaS) provider has announced the pricing details for its Google-style auction initial public offering (IPO), revealing that the float will raise around $99 million (£50 million).

The company, majority-owned by Larry Ellison, chief executive of enterprise software giant Oracle, sells an all-encompassing web-based software suite to small and medium-size businesses, providing them with everything from CRM and accounting functions to reporting and shipping management tools. Customers in the UK include Carphone Warehouse, the YMCA and home appliance parts specialist Europart.

NetSuite will sell 6.2 million shares, around 10.4 per cent of the business, for $13 (£6.50) to $16 (£8) each, according to a statement filed with the US Securities and Exchange Commission. The floatation values the business at about $950 million (£475 million).

Executives from the company are expected to begin meeting with potential investors today ahead of setting the final sale price within the stated range, sources close to the proceedings told IT PRO. The company will use the proceeds of the sale to reduce debt and provide additional working capital to finance infrastructure such as additional data centre capacity to host customer data and instances of its software suite.

In June, NetSuite unveiled a major update to its software suite, while at its annual conference in San Francisco in October, the company launched a new variant that can be rebranded and resold by the channel.

The floatation is unusual as it follows a very similar process to the auction floatation held by search engine Google. By auctioning the shares, the company is far more likely to achieve interest in the offer nearer the upper-end of the price range, as well as involving the actual buyers in the process, rather than relying on underwriters to ensure a successful sale. Google raised $1.2 billion (£600 million) with its auction IPO in 2004, and has subsequently seen the value of its stock soar of the back of renewed interest and confidence in technology stocks.

"That is a six percent loss ratio [in the third quarter] versus a 37 percent loss ratio in the June quarter," said Francis Gaskins, president of research firm IPOdesktop.com. "It would have been hard to do an IPO based on the June quarter." But he added that investors will expect NetSuite to turn a profit quickly.

The company is applying to list its shares under the symbol "N" on the New York Stock Exchange.

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