NetSuite Shares Surge After IPO

Shares of NetSuite (N) surged yesterday after the company completed its initial public offering, closing at $35.50 after debuting at $26 for an opening-day gain of 36.5 percent. NetSuite initially set an IPO price range of $13 to $16, and then raised it twice last week as it became clear that there would be strong demand for the company's shares.

The San Mateo, Calif. company offers on-demand business management software as a service (SaaS) applications, including ERP, CRM and accounting apps. The strong interest in NetSuite bodes well for other companies focused on software as a service (SaaS), according to Eric Savitz at Barron's Tech Trader blog. "In fact, the best known player, Salesforce.com (CRM), seems to be benefiting from the attention on the sector generated by the NetSuite IPO," Eric wrote, noting that shares of CRM rose $5.04 to $64.99 (up 8.4%) for a new all-time high.

NetSuite's use of a dutch auction to price its shares was discussed at the NYTimes' Dealbook blog and TechDirt. "In theory, the auction process sets a price that is closer to the actual market value, which leaves less money on the table for the company going public," wrote DealBook's Andrew Ross Sorkin . "In doing so, though, an auction can also undercut the initial 'pop' that is often hailed as a sign of a hot offering."

Not so in this case, though. "While this definitely worked out well for NetSuite, it does raise some questions about the dutch auction process," wrote TechDirt's Mike Masnick. "It still seems like a much more efficient way to price IPOs than an investment banker picking the price - but it's pretty clear that there are many other factors that go into how investors actually treat a stock once it hits the market."

Several news outlets noted that Oracle's Larry Ellison enjoyed quite a payday Thursday, recording a $2.76 billion. Ellison holds a 54 percent stake in NetSuite, which is now valued at about $1.1 billion. Oracle (ORCL) announced a 36 percent increase in quarterly revenue over the same period a year earlier, prompting a 7 percent gain in the share price that boosted the value of Ellison's 1.17 billion Oracle shares to about $26 billion.

"He had a good day," Jim McGeever, NetSuite's chief financial officer, told the Mercury-News.